In a world that meets the MM$\text{'}63$ conditions, the corporate tax rate is $30\%.$ Company X$,$

which is funded with $100\%$ equity, shows a net profit after taxes of $63,000$ annually. The

CFO of $x$ is thinking about adjusting the capital structure and just visited a very nice lecture

at Avans University of Applied Sciences. He got attached to the idea to issue bonds. The

expected actual interest rate equals $6\%$ but the corporate tax will ensure a positive

contribution to the value of the company.

Required:

a$.$ Calculate the company value of $x$ when the required return for the shareholders is $10\%.$

b$.$ Calculate the value of the company when the plan of issuing bonds for $100,000$ at $6\%$ is

executed.

c$.$ Calculate the WACC of company $x$ after issuing the bonds successfully.

d$.$ Calculate the Return on equity of company $x$ after issuing the bonds successfully.

e$.$ What effect will issue debt have on the value of the company and the WACC?

f$.$ Why can't the MM$\text{'}63$ theory be the ultimate capital structure theory?

g$.$ Name one example of a factor that affects the value of the company $($and the WACC$)$

negatively which is not included in the theory of MM$\text{'}63.$