MM with Corporate Taxes Companies U and L are identical in every respect except that U is unlevered while L has $8 million of 6% bonds outstanding. Assume: (1) All of the MM assumptions are met. (2) Both firms are subject to a 25% federal-plus-state corporate tax rate (3) EBIT is $3 million. (4) The unlevered cost of equity is 12% 3. What value would MM now estimate for each firm? (Hint: Use Proposition 1.) Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places Company US 300 million Company LS million . What is Ts Por Firm U? For firm L? Do not round Intermediate calculations. Round your answers to one decimal place. Firm U: 9 Firm c. Hnd St, and then show that SD-V results in the same value as obtained in Parta. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round Intermediate calculations. Round your answers to two decimal places Sus million SUD- million d. What is the WACC for Fimm U7 For Fim L? Do not round intermediate calculations. Round your answers to two decimal places Firm Firm (16-7) V. - Vu+ Value of side effects =V+ Present value of annual tax savings - V. + Tax shield = Vy + V which Under their assumptions, they showed that the tax shield is equal to the corpo- rate tax rate, T, multiplied by the amount of debt, D: V = V, + TD (16-8)