What issues would you suggest the company?s management think about before moving

forward with this capital structure strategy?

The management should think about potential costs of bankruptcy and financial distress.

They also need to think about potential agency costs associated with issuing the debt.

Finally, they need to think about the likelihood that the interest expense is so high that

they may not be able to take advantage of the interest tax shields.

e. As a consistency check on your previous valuation, value Germunder as of the end of

Year 0 using all of the above assumption and the WACC valuation method. Again,

assume that the appropriate discount rate for interest tax shields is the unlevered cost of

capital for this company.