MMM Co. has unleveraged beta 1.2, risk free rate 5%, and market risk premium for 4%. It works in the 40% tax bracket. The company is intending to build a new plant, and is studying the scenarios to finance it; The first scenario (1) is to finance the plant totally from equity, without any debt, and then the expected earnings per share will be to $2.7/share. The second scenario(2) is to finance the plant from a combination of debt and equity, where it is intending to borrow 30% of the budget with an interest rate of 9% before tax, then the expected earnings per share will increase to $3.2/share. 7- If the company has a target WACC of 9%, knowing that it can issue bonds at rate of 8% and maintain Beta leverage 1.35, how much approximately it should use equity as portion of it's total capital to meet it's target? * 100% 75% 50% 25% None of the above 8- Assume the company needs to maintain a price per share $30 with EPS 12% from the price and a cost of capital no more than 8%, knowing that the company can borrow at any level of debt at an interest rate before tax 9.5%. Then how much should be the approximate level of debt for the company to reach its target. * 72.48% 27.52% 63.49% 36.51% None of the above