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Here are book-and market value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Net working capital $ 50 Debt

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Here are book-and market value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Net working capital $ 50 Debt Long-term assets 5e Equity $ 100 $ 70 30 $ 100 Market-Value Balance Sheet Net working capital $ 50 Debt Long-term assets 200 Equity $ 250 $ 70 180 $ 250 Assume that MM's theory holds except for taxes. There is no growth, and the $70 of debt is expected to be permanent. Assume a 215 corporate tax rate. a. How much of the firm's market value is accounted for by the debt-generated tax shield? (Enter your answer in million rounded to 2 decimal places.) b. What is United Frypan's after-tax WACC if lebt - 74% and requity - 15.6%? (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 7.4%. (Do not round intermediate ENG SL 2 $ 250 $ 250 Assume that MM's theory holds except for taxes. There is no growth, and the $70 of debt is expected to be permanent. Assume a 21% corporate tax rate. a. How much of the firm's market value is accounted for by the debt-generated tax shield? (Enter your answer in million rounded to 2 decimal places.) b. What is United Frypan's after-tax WACC if Debt = 7.4% and fequity = 15.6%? (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 7.4% (Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.) million % b. PV tax shield WACC Now value of the firm million C

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