ulduleLTO ASSIGTEIL 1 SOVE 8 Problem 16-21 Taxes and the Cost of Capital (LO2) Here are book and market value balance sheets of the United Frypan Company (figures in $ millions) 11.11 points $ Book-Valve Balance Sheet Net working capital $ 45 Debt Long-term assets! 55 Equity $ 100 165 35 $ 100 eBook Print Debt. $ Market Value Balance sheet Net working capital $ 45 Long-term assets 190 Equity $ 235 65 170 $ 235 References Assume a 21% Assume that MM's theory holds except for taxes. There is no growth, and the $65 of debt is expected to be pern corporate tax rate. a. How much of the firm's market value is accounted for by the debt-generated tax shield? (Enter your answer in million rounded to 2 decimal places.) b. What is United Frypan's after-tax WACC if Coebt = 7.5% and Tequity 15.5%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume a borrowing rate of 7.5%. (Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.) a. PV tax shield million b. WACC % c. New value of the firm million