Question 3 (25 marks) Forward Forwarding Company Limited expects an earnings before interest and tax (EBIT) of $30,000 every year forever. The company currently has no debt, and its cost of equity is 11%. Suppose the corporate tax rate is 22%. a. Compute the current value of the company (5 marks) b. Suppose the company can borrow at 6%. What will the value of the company be if the company takes on debt equal to 50% of its unlevered value? (5 marks) c. If, instead, the company plans to take on debt equal to 50% of its levered value, calculate its value. (5 marks) d. Is there an easily identifiable debt-equity ratio that will maximize the value of a company? Explain (4 marks) e. Are certain types of industries more likely to be highly leveraged than others? Discuss and explain (6 marks) Question 4 (25 marks) Question 3 (25 marks) Forward Forwarding Company Limited expects an earnings before interest and tax (EBIT) of $30,000 every year forever. The company currently has no debt, and its cost of equity is 11%. Suppose the corporate tax rate is 22%. a. Compute the current value of the company (5 marks) b. Suppose the company can borrow at 6%. What will the value of the company be if the company takes on debt equal to 50% of its unlevered value? (5 marks) c. If, instead, the company plans to take on debt equal to 50% of its levered value, calculate its value. (5 marks) d. Is there an easily identifiable debt-equity ratio that will maximize the value of a company? Explain (4 marks) e. Are certain types of industries more likely to be highly leveraged than others? Discuss and explain (6 marks) Question 4 (25 marks)