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MM with Corporate Taxes Companies U and L are identical in every respect except that is un evered while L has $14 millio of 6%
MM with Corporate Taxes Companies U and L are identical in every respect except that is un evered while L has $14 millio of 6% bonds outstanding Assu me that. i the MM assumptions are met. 2) Both firms are subject to a 40% federal-plus-state corporate tax rate. 3) EBIT s $5 milion 4 The unlevered cost of equit s 2 a. What value would MM now estimate for each firm? (Hint: Use Proposition I.) 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 U: $ Company L:$ million million b. What is rs for Firm U? Round your answer to one decimal place What is rs for Firm L? Do not round intermediate calculations. Round your answer to one decimal place c. Find SL and then show hat SL + D = VL results in the same value as obtained in Parta. Enter your answers in milions or example, an answer of SO 000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places SL = $ million million d. What is the WACC for Firm U? Do not round intermediate calculations. Round your answer to two decimal places. What is the WACC for Firm L? Do not round intermediate calculations. Round your answer to two decimal places
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