Williams Corporation and Tremont Corporation are identical in every way except their capital structures. Williams Corporation, an all-equity firm, has 35 million shares of stock outstanding, currently worth $35 per share. Tremont Corporation uses leverage in its capital structure. The market value of Tremont's debt is $350mil., and its cost of debt is 4.5 percent. Each firm is expected to have earnings before interest and tax of $135mil. in perpetuity. Assume that every investor can borrow at 4.5 percent per year. Corporate tax rate is 40%.

a. What is the value of Tremont's Corporation? (5 pt)

b. How much will it cost to purchase 20% of Tremont's equity? (5 pt)

c. What is Tremont's cost of equity? (5 pt)

d. What would be the Tremont's Corporations weighted average cost of capital (WACC)? (5 pt)