18 I QUESTION 2 1 Griogotts Industries pays interest of $3 million each year on bonds with an average coupon rate of 7.548. The firm has 4 million shares of stock outstanding and pays out 100% of earnings is dividends. Earnings per share (EPS) is $3.50. Griugatt's cost of equity is 13.5%. Assume Gringotts Industries is subject to income tax at a rate of 41%. 1. Calculate the value of the firm assuming there is no tax shield associated with debt (that is, assume interest is subtracted in calculating earnings, but is not deductible in calculating taxe). Enter your answer is millions. For example an answer of $1.2 million should be entered a 1.2, not 1200000. Do not round intermediate alculations Round the answer to two decimal places. $ million 2. Compare it to the value calculated under the assumptions of Modigliani and Mller's simplest model that there are no taxes and no transactions costs in financial markets). How much value bas theoretically been lost to investors as a result of taxes? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1200000. Round the answer to two decimal places. S million 3. What is the value of the tax shield associated with the firm's debe? Enter your answer in millions. For example, an answer of 12 million should be entered as 1.2, not 1200000. Do not round in termediate calculations. Rous answer to ho decimal places $ million 4. What is the benefit of debt (the present value of the annual tax shield in perpetuir discounted at the new debo)? Enter your answer in millions. For example, an answer of 51.2 million should be an ered a 12. not Round the answer to no decimal places S million Calculate the theoretical value of the firm including the benefit of debt Enter your war in millas Far example, an answer of S1.2 million should be entered a sor 1200000. Round the wind million Inidos