nranate taes. MM theory implies that thst ll firms e leverage of the firm increases maintaim ah curporate taxes MM theory implies that that all frms should choose an all debt capital strueture efect the capital strvcture that aximises the firen's WACC an unlevered firm with a total market value of $360,000 and 12,000 shares of stock nrm has expected EBIT of $17,500. The firm is considering a bond issue of 5120,000 will be used to repurchase shares. t rate of 5.9 percent e tax rate is 30 percent How many shares will Brown's have to repurchase after the A) 2,.345 ) 4,712 D) 3,636 8. Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debi that e a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm A) $996,75889 ) $1,079,402.05 C) $978,758.89 D) $971,282.05 E) $1,036,758.89 9. A valuable firm will tend to: A) see its stock price increase if it issues debt beyond its optimal debt level. B) issue more debt than a less valuable firm of comparable size. C) reduce its debt level as a positive signal for the firm. D) issue debt, but only on a temporary basis purely to fool investors regarding the firm's value. E) see its stock price increase when it announces an exchange offer that decreases its leverage. 10. Baker Breads has $428,000 of debt outstanding that is selling at par and has a coupon rate of 6.25 percent. Baker's EBIT is $77,000 and its tax rate is 34 percent. The market value of the firm's equity is $1.25M. What is the present value of the tax shield? A) $9,095 B) $10,459 C) $52,760 D) $145,520 E) $147,600 11. Leisure Vacations is an unlevered firm with after-tax earnings of $57,980, a cost of capital of 13.2 percent, and a tax rate of 35 percent. What is the value of this firm? A) $285,507.58 B) $318,906.15 C) $401,008.47 D) $439,242.42 E) $368,511.12