Mashariki Limited real assets are expected to generate earnings before interest and taxes (EBIT) of 120 million at the end of every year in perpetuity. The firm is currently financed by 50,000 shares each worth Sh. 1,000 each and by Sh. 130 million worth of perpetual debt issued at a rate of 12%. The corporate tax rate is 35%. Ignore personal taxes and bankruptcy costs.

Required:

a) What is the current total firm value for Mashariki Limited?

b) What is the current expected return on Mashariki Limited Equity)

c) Determine Masharki Limited WACC

d) Show that the value f the firm can be obtained by discounting its after tax earnings at the weighted average cost of capital