Here is XYXs Co market-value balance sheet (figures in $ millions):

	$		$
Net working capital	550	Debt	800
Long-term assets	2,150	Equity	1,900
	2,700		2,700

The debt is yielding 7%, and the cost of equity is 14%. The tax rate is 35%. Investors expect this level of debt to be permanent.

Questions:

a. What is XYXs WACC? (x points)

b. What would the value of the company if XYX retired all its debt? Due to what is the change in the value of the company? (x points)

c. Now imaging that there is no tax and the following is the market-value balance sheet for the XYXs Co (figures in $ millions) as in the original announcement:

	$		$
Net working capital	550	Debt	800
Long-term assets	2,150	Equity	1,900
	2,700		2,700

The debt is yielding 7%, and the cost of equity is 14%.

In this case, how would the value of the company change if XYX retired all its debt? (x points)