Here are book- and market-value balance sheets of the United Frypan Company: Book-value Balance Sheet Net working capital \$ 30 Debt \$ 80 Longterm...
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# data and three part question attached,. Attachment 1 Attachment 2 ATTACHMENT PREVIEW Download attachment Screen Shot 2019-09-23 at 11.33.42 AM.png Here are book- and market-value balance sheets of the United Frypan Company: Book-value Balance Sheet Net working capital \$ 30 Debt \$ 80 Long—term assets '70 Equity 20 \$ 100 \$ 100 Market—Value Balance Sheet Net working capital \$ 30 Debt \$ 80 Long—term assets 170 Equity 120 \$ 200 \$ 200 Assume that MM’s theory holds except for taxes. There is no growth, and the \$80 of debt ‘Is expected to be permanent. Assume a 32% corporate tax rate. ATTACHMENT PREVIEW Download attachment Screen Shot 2019-09-23 at 11.33.49 AM.png Assume that MM’s theory holds except for taxes. There is no growth, and the \$80 of debt is expected to be permanent. Assume a 32% corporate tax rate. a. How much of the ﬁrm's market value is accounted for by the debt-generated tax shield? PV tax shield b. What is United Frypan’s after—tax WACC if rue},t = 6.5% and rEquity = 16.5%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) __I c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume a borrowing rate of 6.5%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) New value of the ﬁrm I I

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