Need some help on this Finance homework question. No excel solutions please provide full explanation.

F41 G H S Unlevered Firm Levered Firm 7 Balance Sheet Liabilities 100,000 Balance Sheet Liabilities Assets Assets 10 11 12 Equity Equity 13 100,000 100,000 100,000 100,000 100,000 15 17 18 Rd = 5% Tax rate = 35% Price per share: $ Number of shares: 10.00 10,000 20 21 22 23 50,000 50,000 24 Income Statement EBIT Interest expense Taxable income Taxes Net Income Income Statement EBIT Interest expense Taxable income Taxes Net Income 25 26 50,000 (17,500) 32,500 27 28 29 30 EPS ROE EPS ROE 31 32 33 34 35 36 You have decided to issue debt and buy back 1/2 of your company's stock. 1. Restate the balance sheet and income statement to reflect this transaction. 2. What is the value of the unlevered firm? 3. What is the PV of the tax shield? 4. Should you do this transaction? Why or why not? 37 38 39