Ee 465. Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions):Book-Value Balance Sheet$ 70Debt30Equity$ 100Net working capitalLong-term assetsMarket-ValueNet working capitalLong-term assetsBalance$ 70150$ 220SheetDebtEquityAssume that MM's theory holds except for taxes. There is no growth, and the $60 of debt is expected to be permanent.Assume a 21% corporate tax rate.a. PV tax shieldb. WACCc. New value of the firm$ 6040$ 100a. How much of the firm's value is accounted for by the debt-generated tax shield?Note: Enter your answer in million rounded to 2 decimal places.$$ 60160$ 220b. What is United Frypan's after-tax WACC if Debt = 6.1% and rEquity = 16.9%?Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after agrace period of 5 years. What will be the new value of the firm, other things equal? Assume an 6.1% borrowingrate.Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.Answer is complete but not entirely correct.$12.6013.61211.05million%million

Name: Ee 465. Here are book- and market-value balance sheets of the United F
Uploaded: 2024-03-20T06:33:21.000Z
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Description: Ee 465. Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions):Book-Value Balance Sheet$ 70Debt30Equity$ 100Net working capitalLong-term assetsMarket-ValueNet working capitalLong-term assetsBalance$ 70150$

Therefore, the PV tax shield is $12.60.

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Finance

Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet $ 70 30 $ 100 Net working capital Long-term assets Market-Value Net working capital Long-term assets Balance $ 70 150 $ 220 Debt Equity Sheet Debt Equity $ 60 40 $ 100 $ 60 160 $ 220 Assume that MM's theory holds except for taxes. There is no growth, and the $60 of debt is expected to be permanent. Assume a 21% corporate tax rate. a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if Debt = 6.1% and rEquity = 16.98? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 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 an 6.1% borrowing rate. Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.