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 6.8%.(Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.)

What is the new value of the firm?

Answer A & B are correct // Just need C.

3.5 points Here are book and market-value balance sheets of the United Frypan Company (gures in $ millions): Book-Value Balance Sheet Net working capital 5 30 Debt Longterm assets 70 Equity 5 100 50 50 100 MarketValue Balance Sheet Net working capital 5 30 Debt Longterm assets 185 Equity 5 215 50 165 215 Assume that MM's theory holds except for taxes. There is no growth, and the $50 of debt is expected to be permanent. Assume a 21% corporate tax rate. a. How much of the rm'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 rDebt = 6.8% and rEquity = 16.2%? (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 rm, other things equal? Assume a borrowing rate of 6.8%. (Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.) PV tax shield WACC New value of the rm