The Kimberly Corporation is a zero growth firm with an expected EBIT of $100,000 and a corporate tax rate of 30 percent. Kimberly uses $500,000 of 12.0 percent debt financing, and the cost of equity to an unlevered firm in the same risk class is 16 percent.

I don't need help with questions 1 and 2. I just need help with 3 and 4, and I wasn't sure if questions 1 and 2 had any information that would help get the answers for 3 and 4.

1. What is the value of the firm according to MM with corporate taxes? $587,500 (Correct Answer)

2. What is the firms cost of equity? 32.0% (Correct Answer)

3. If the effective personal tax rate on stock income is 20 percent, and the effective personal tax rate on debt income is 25%, what is the firms gain from leverage according to the Miller model?

1. $126,667
2. $130,555
3. $145,323
4. $163,587

4. Based on the assumption of the previous question (question 9), assuming the cost of equity to an unlevered firm is now 20%. what is the value of the firm according to the Miller model?

a. $350,000

b. $437,500

c. $476,667

d. $564,167