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The common stock and debt of Northern Sludge are valued at $80 million and $20 million, respectively. lnvestors cu r. 162% return on the common stock and alan 75% return on the debt. If Northern Sludge issues an additional $11 million of stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change In capital structure does not affect the interest rate on Northern's debt and that there are no taxes. (Do not round intermediate coleulooneg, Enter your answer as a percent rounded to two decimal places.) https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%2530%252F%252Fle... apter 16 Homework i Saved Help Sav 4 Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet .5 Net working capital Debt $ 60 points Long-term assets 75 Equity 40 $ 100 $ 100 eBook Market-Value Balance Sheet Print Net working capital $ 25 Debt $ 60 Long-term assets 180 Equity 145 $ 205 $ 205 Assume that MM's theory holds except for taxes. There is no growth, and the $60 of debt is expected to be permanent. Assume a 21% corporate tax rate. . How much of the firm's market value is accounted for by the debt-generated tax shield? (Enter your answer in million rounded to 2 decimal places.) b. What is United Frypan's after-tax WACC if /Debt = 6.7% and Equity - 16.3%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume a borrowing rate of 6.7%. (Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.) Mc Graw L 2 1 4 O Type here to search PriSo F11 F12 X C F8 F9 F10 F3 F5 F7 F2 F4 a4 Long-term assets 180 Equity 145 $ 205 $ 205 5 Assume that MM's theory holds except for taxes. There is no growth, and the $60 of debt is ints corporate tax rate. a. How much of the firm's market value is accounted for by the debt-generated tax shield? (E eBook decimal places.) b. What is United Frypan's after-tax WACC if /Debt = 6.7% and Equity = 16.3%? (Do not round Print answer as a percent rounded to 2 decimal places.) c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax years. What will be the new value of the firm, other things equal? Assume a borrowing rate o calculations. Enter your answer in million rounded to 2 decimal places.) a. PV tax shield million b. WACC C. New value of the firm million raw