Your all-equity firm has beta of 2.0 and a free cash flow today of $10M. The firm is expected to produce a perpetual free cash flow of $12M per year, starting next year that grow at rate of 1 percent per year. Assume a risk free rate of 3.0 percent and an expected market risk premium of 6.0 percent. Your firm has 7M shares outstanding. What is the price per share of your firm?

a. 12.86

b. 95.71

c. 13.67

Your all-equity firm has beta of 2.0 and a free cash flow today of $10M. The firm is expected to produce a perpetual free cash flow of $12M per year starting next year, that grow at rate of 1 percent per year. Assume a risk free rate of 3.0 percent and an expected market risk premium of 6.0 percent. Your firm has 7M shares outstanding.

After paying a dividend of $2.85 per share, your firm's share price falls to $11.82. This ex-div price is likely because your investors pay:

a. 35 % tax on dividends

b. no taxes

c. 20% tax on dividends

Your all equity firm has a price per share of $18 and has 7M shares outstanding. Suppose the firm issue $12M worth of debt. The debt has a face value of $12M, a coupon rate of 7 percent, and 8 years until maturity. The expected return on the debt is 7 percent. Assume a corporate tax rate of 35%.

What is the value of tax shield for issuing this debt?

a. 1.76M

b. 2.06M

c. 4.20M