PepsiCo Inc. (PEP) is considering a change in its capital structure. PEP currently has $20 million in debt carrying a rate of 6%, and its stock price is $40 per share with 2 million shares outstanding. PEP is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $13.527 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is 6%, and the risk-free rate is 6%. PEP is considering increasing its debt level to a capital structure with 40% debt, based on market values, and repurchasing shares with the extra money that it borrows. PEP will have to retire the old debt in order to issue new debt, and the rate on the new debt will be 12%. PEP has a beta of 1.0.

a. What is PEP's unlevered beta? Use market value D/S (which is the same as wd/ws) when unlevering. Do not round intermediate calculations. Round your answer to two decimal places.

b. What are PEP's new beta and cost of equity if it has 40% debt? Do not round intermediate calculations. Round your answers to two decimal places. Beta:

Cost of equity: %

c. What are PEPs WACC and total value of the firm with 40% debt? Do not round intermediate calculations. Round your answer to two decimal places. %

What is the total value of the firm with 40% debt? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answer to three decimal places. $ million