Here are book- and market-value balance sheets of the United Frypan Company:

Assume that MMs theory holds except for taxes. There is no growth, and the $65 of debt is expected to be permanent. Assume a 31% corporate tax rate.

a. How much of the firm's market value is accounted for by the debt-generated tax shield?

b. What is United Frypans after-tax WACC if r_Debt = 7.5% and r_Equity = 15.5%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume a borrowing rate of 7.5%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Book-Value Balance Sheet $45 Debt Net working capital Long-term assets $ 65 55 Equity35 $ 100 $ 100 Market-Value Balance Sheet Net working capital Long-term assets $ 65 170 $45 Debt 190 Equity $ 235 $ 235