You have the following information for the firm. You need to calculate Value of Operations (firm value) after firm issues new debt.

Rf = 4%

RP= 6%

Bu = 1.22

Tax = 25%

FCF = 90

g=0%

First case when firm is 20% D and 80% E

Debt = 20%

Equity = 80%

rd = 4%

Second case when firm is 30% D and 70% E

Debt = 30%

Equity = 70%

rd = 5%

What is the difference between new Vop (30% debt and 70% equity) and old Vop (20% debt and 80% equity) ?

In other words Vop 30%debt, 70% equity - Vop 20%, 80equity = ?

The answer on my screen is 4.34 - This is the format. Your answer can also be negative, since taking more debt could pass your optimal D/E ratio.