Miller model

Scorecard Corp. and Carlson Co. are identical in every respect except that Scorecard is unlevered and Carlson has $9.0 million of 5% bonds outstanding. Assume all of the following:

1.All of Modigliani and Miller's assumptions are met.

2.Both firms are subject to a 40% corporate tax rate.

3.EBIT is $3.0 million for both firms.

4.Investors in both firms face a tax rate (Td) of 28% on debt income and a tax rate (Ts) of 8% on stock income

.5.The rate of return before personal taxes (rsu) is 8%.

Use Miller's model to fill in the table for Scorecard Corp. and Carlson Co.

Scorecard Corp .Carlson Co.

Value of the firm

Value of the stock

Cost of equity

WACC