Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The companys EBIT is $13.24 million, and its tax rate is 15%. Pettit can change its capital structure either by increasing its debt to 70% (based on market values) or decreasing it to 30%. If it decides to increase its use of leverage, it must call its old bonds and issue new ones with a 12% coupon. If it decides to decrease its leverage, it will call its old bonds and replace them with new 8% coupon bonds. The company will sell or repurchase stock at the new equilibrium price to complete the capital structure change. The firm pays out all earnings as dividends; hence its stock is a zero-growth stock. Its current cost of equity, r_s, is 14%. If it increases leverage, r_s will be 16%. If it decreases leverage, r_s will be 13%.

What is the firms WACC and total corporate value under each capital structure?

Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight debt with an 8% coupon paid annually. The second issue consisted of 20-year bonds with a 6% coupon paid annually and attached warrants. Both issues sold at their $1,000 par values.

What is the implied value of the warrants attached to each bond?