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Rumolt Motors has 30M shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a current market value of

Rumolt Motors has 30M shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a current market value of $150M. Suppose Rumolts equity cost of capital is 10% and its debt cost of capital is 5%. a. What is the PV of the interest tax shield for Rumolt if it only pays interest on its bonds (they are permanent debt) and its tax rate is 35%. b. What is Rumolts cost of capital for unlevered equity? c. What is Rumolts after tax weighted average cost of capital? d. What would the market value of Rumolts assets be if the firm had no debt?

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