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Question 4. (10 marks) Value Co (Value) operates under the assumptions of Modigliani and Miller. Value currently has no debt, and its earnings are expected be $200,000 and can range from a minimum of $100,000 to a maximum of $500,000. Value has 100,000 shares outstanding and its shares trade at $15 per share. (a) Howard is Value's CFO and Howard argues that Value would be better off by borrowing $900,000 at 10% interest to repurchase Value's shares at $15. If Value goes with Howard's proposal, what is the change in Value's ROE when Value's earnings before interest is $100,000,$200,000, and $500,000 respectively? (Show all your work. Your answer must be handwritten.) (5 marks) (b) Anne owns 10,000 Value shares. Anne argues that it is unnecessary for Value to borrow money to repurchase debt since she can borrow as well, at the same interest rate. If Anne wants to have the same ROE outcomes as Howard's proposal, how much will Anne need to borrow, and what is the total number of shares that Anne will own? (Show all your work. Your answer must be handwritten.) (5 marks) Question 4. (10 marks) Value Co (Value) operates under the assumptions of Modigliani and Miller. Value currently has no debt, and its earnings are expected be $200,000 and can range from a minimum of $100,000 to a maximum of $500,000. Value has 100,000 shares outstanding and its shares trade at $15 per share. (a) Howard is Value's CFO and Howard argues that Value would be better off by borrowing $900,000 at 10% interest to repurchase Value's shares at $15. If Value goes with Howard's proposal, what is the change in Value's ROE when Value's earnings before interest is $100,000,$200,000, and $500,000 respectively? (Show all your work. Your answer must be handwritten.) (5 marks) (b) Anne owns 10,000 Value shares. Anne argues that it is unnecessary for Value to borrow money to repurchase debt since she can borrow as well, at the same interest rate. If Anne wants to have the same ROE outcomes as Howard's proposal, how much will Anne need to borrow, and what is the total number of shares that Anne will own? (Show all your work. Your answer must be handwritten.)