The $M$&$M$ theory states that in the presence of differential taxes, the value of the firm may rise

by a portion of the amount borrowed. Given the following data,

${}_C=$ corporate tax rate $($e$.$g$.,\{$:$21\%)$

${}_S=$ tax rate on income from common stock $($e$.$g$.,15\%)$

${}_d=$ Tax rate on income from debt $($e$.$g$.,\{$:$0\mathrm{.}25\%)$

A$.$ Calculate the value of the firm if it is currently an all$-$equity financed for $$500$mil, and is

issuing $($selling$)$ $$150$ mil in debt.

B$.$ What is the added value as a result of leverage?

C$.$ Does this refute $M$&$M$ hypothesis regarding the independence of value of the firm and

how it is financed?

D$.$ Explain why M&M hypothesis is correct in that the value of a fruit garden depends on the

overall profit resulting from its core business $($net operating income NOI$).$