Smoke and Mirrors currently has EBIT of $15,000 and is all-equity-financed. EBIT is expected to stay at this level indefinitely. The firm pays corporate taxes equal to 32% of taxable income. The discount rate for the firm's projects is 12%.

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a. What is the market value of the firm ? ( Round your answer to 2 decimal places.] Market value of the firm $85 , 000. 00 0 D. How assume the firm issues $40, 000 of debt paying interest of 6%/ per year and uses the proceeds to retire equity . The debt is expected to be permanent . What will happen to the total value of the firm (debt plus Equity's? The total value of the firm increases @ by $ 14, 000 0. C. Recompute your answer to part I bj under the following assumptions : the debt issue raises the possibility of bankruptcy , the firm has a 35% chance of going bankrupt after 4 years ; if it does go bankrupt , it will incur bankruptcy' costs of $180, 000 . The discount rate is 129/6. ( Round your answer to A decimal places .! PV Of the expected cost of bankruptcy $8.8, 510. 4640 0