Unnamed Inc. is contemplating changing its capital structure. Currently, the company has no debt and there are 8,000,000 shares outstanding. The companys unlevered cost of equity is 12% and its annual EBIT is $62,500,000. It is considering issuing $250,000,000 of perpetual debt. If the company issued the debt, it would have an interest rate of 3%. The debt would be issued at par. The proceeds of the debt issue would be used to repurchase the companys stock. The corporate tax rate is 40%.

9. What is the current value of Unnamed Inc. as an all-equity firm? A) $62,500,000 B) $458,333,333 C) $763,888,889 D) $520,833,333 E) $312,500,000

10. What will be the required rate of return on the companys equity and the WACC, respectively, after the debt is issued and the shares are repurchased? A) 18.77%; 8.48% B) 20.31%; 9.09% C) 25.85%; 11.27% D) 15.51%; 7.20% E) 33.60%; 8.16%

11. What would be the firms stock price after the debt issue but before the shares are repurchased? A) $51.56 B) $40 C) $39.06 D) $82.81 E) $70.31