Question 3 Assume you are in a Modigliani Miller world with corporate taxes added. CD Corp. is all equity financed with 6,000 shares outstanding worth $7 each. They are planning on issuing $25,000 of new perpetual debt at the 8% market rate of interest. The effective tax rate is 35%. Required: (i) (ii) Discuss and compare the various M&M propositions. (10 marks) State, with supporting M&M arguments, what the market value of the firm's outstanding equity would be after they make the debt for equity exchange? (5 marks) Question 3 Assume you are in a Modigliani Miller world with corporate taxes added. CD Corp. is all equity financed with 6,000 shares outstanding worth $7 each. They are planning on issuing $25,000 of new perpetual debt at the 8% market rate of interest. The effective tax rate is 35%. Required: (i) (ii) Discuss and compare the various M&M propositions. (10 marks) State, with supporting M&M arguments, what the market value of the firm's outstanding equity would be after they make the debt for equity exchange