T$0.$he Nova Corp. has a perpetual EBIT of $$450,000.$ The firm has a corporate tax rate of

$40\%.$ As an un$-$levered firm, the beta for Nova Corp. would be $\mathrm{.}90.$ The firm has $76,482$

shares issued and outstanding and $$600,000$ in $6\%$ coupon bonds issued and

outstanding. Currently, T$-$bills have an annual yield of $4\%$ and the TSX market portfolio

is expected to yield $10\%$ annually. $(13$ points$)$

a$.$ Using M&M Case II $($with corporate tax$),$ calculate the firm$$s value as a levered

firm.

b$.$ What is the firm$$s WACC with current capital structure.

c$.$ What is the value per share in the market right now?

d$.$ You decided to issue $$200,000$ new equity to retire bonds. What is the firm$$s new

equity value with less debt? And the new WACC? Can you provide some

explanations of the change WACC after retiring debt?