Sandeep Karki, CEO of Karki Corporation is concerned about his firm's level of debt financing. The company users MM approach has earnings before interest and taxes of Rs. 3 million and 40 percent tax rate. Its required rate of return on equity rate of return on equity in the absence of borrowing is 18 percent. (a) In the absence of personal taxes, what is the value of the company in an MM World. (I) With the no leverage. (ii) With Rs. 4 million in debt financing. (iii) With Rs. 7 million in debe finatinge (b) Personal as well as corporate taxes now exist. The marginal personal tax rate on common stock income is 25 percent and the marginal personal tax rate on debt income is 30 percent. Determine the value of the company for each of the three debt altematives in pant" a" why do you answer differ? (c) Also explain the optimal capital structure