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Question 2 a) Assume an M&M world with no corporate or personal taxes. Market conditions are such thatRq = 5%, and E[RM] = 15%. XYZ Corp. is currently all-equity financed and has a value of $100,000,000. XYZ currently gives a return on equity of 18%. Determine the value of XYZ's equity beta Bs. b) Refer to the problem in a). XYZ changes its capital structure such that its debt-to- equity ratio is now 0.6. The return on XYZ's debt is 5%. Calculate: i) ii) iii) iv) v) vi) rs (i.e. the return on equity) Bs (i.e. the beta on equity) rwacc (i.e. the weighted average cost of capital) BB (i.e. the before tax debt) The total value of XYZ. The value of XYZ's equity. Question 3 Assume the M & M model with no taxes. a) List at least three of the assumptions of the model, other than the fact that no corporate or personal taxes exist. b) For each of the assumptions you listed above, provide a brief explanation of why each of the assumptions is necessary or mention the effect the variable might otherwise have on the value of the firm as perceived by investors. c) Briefly state the conclusion of the M&M model with no taxes, by stating the results known as propositions I and II. Include a mention of home-made leverage in your explanation