Suppose an unleveraged company in a world without taxes has $$245$ million in assets.

a$.$ With $3,500,000$ outstanding shares of stock, what is the price of each share?

b$.$ Suppose the expected EBIT for this company is $$28,000,000$ per year. Calculate each of the following:

ROA

ROE

EPS

Cost of Equity $($Rs$)$

WACC

c$.$ Now, suppose you wish to shift the capital structure of this company, issuing $$140$ million in perpetual bonds and using the proceeds to buy up shares of stock. How many shares will be outstanding after this shift? $($show$)$

d$.$ If the interest rate on your debt is $8\mathrm{.}1\%,$ what is your expected EBT? $($show$)$

e$.$ Calculate each of the following for the newly leveraged firm:

ROA

ROE

EPS

Cost of Equity $($Rs$)$

WACC

f$.$ Using $Rs$&$Rb$ and the relevant annual CF to equity and debt, calculate the value of the firm $($V$).$

g$.$ Using WACC and the relevant annual CF to the firm, calculate the value of the firm $($V$).$

Now, take the same firm, but put it in an environment where there is a $28\%$ tax rate.

h$.$ What is the value of the unleveraged firm in the world with taxes and what will be the price of each equity share?

i$.$ Calculate each of the following for the unleveraged firm:

ROA

ROE

EPS

Cost of Equity $($Rs$)$

WACC

Now add the $$140$ million in perpetual debt.

j$.$ What is the value of the leveraged firm in the world with taxes and what will be the price of each equity share?

k$.$ How many shares will be left outstanding after the change in capital structure this time

Calculate each of the following for the leveraged firm:

ROA

ROE

EPS

Cost of Equity

WACC

m$.$ Using Rs & $Rb$ and the relevant annual CF to equity and debt, calculate the value of the Equity $(S),$ the value of debt $($B$),$ and the value of the firm $($V$).$

n$.$ Using WACC and the relevant annual CF to the firm, calculate the value of the firm $($V$).$