Use the following information to answer questions $21-25.$ Modigliani Corporation

expects it$$s EBIT to be $$270,000$ perpetually and their cost of unlevered equity is

$15\%.$ Their tax rate is $30\%.$ They are contemplating borrowing $$750,000$ at an

interest rate of $9\%$ to repurchase shares.

$21.$ What is the value of the unlevered firm?

a$.$ $$1,240,000$

b$.$ $$1,260,000$

c$.$ $$1,280,000$

d$.$$$1,300,000$

e$.$ $$1,320,000$

$22.$ What is the value of the firm after re$-$structuring?

a$.$ $$1,425,000$

b$.$ $$1,445,000$

c$.$ $$1,465,000$

d$.$ $$1,485,000$

e$.$ $$2,005,000$

$23.$ What is the cost of equity after restructuring?

a$.18\mathrm{.}29\%$

b$.18\mathrm{.}89\%$

c$.19\mathrm{.}29\%$

d$.19\mathrm{.}89\%$

$8$

e$.20\mathrm{.}29\%$

$24.$ What is the WACC after restructuring?

a$.11\mathrm{.}9697\%$

b$\mathrm{.}12\mathrm{.}729\%$

c$.12\mathrm{.}9697\%$

d$.13\mathrm{.}729\%$

e$.13\mathrm{.}9697\%$

$25.$ If Miller owned $1000$ shares of Modigliani Corporation and preferred the original

capital structure, how could he replicate the returns he would get under the original

structure $($round to the nearest share bought or sold$).$

a$.$ Borrow enough money at $9\%$ to buy $450$ shares

b$.$ Sell $505$ shares and invest the proceeds at $9\%$

c$.$ Borrow enough money at $9\%$ to buy $505$ shares

d$.$ Sell $1020$ shares and invest the proceeds at $9\%$

e$.$ Borrow enough money at $9\%$ to buy $1020$ shares