[Q: 16-3357135] MM Propositions (15 points total). A levered firm currently holds $200,000 in perpetual debt that it had

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Q 16 3357135 Mm Propositions 15 Points Total A Levered Firm Currently Holds 200 000 In Perpetual Debt That It Had 1 (30.99 KiB) Viewed 67 times

[Q: 16-3357135] MM Propositions (15 points total). A levered firm currently holds $200,000 in perpetual debt that it had issued at a pretax rate of 6.5%. The firm expects its EBIT to be $290,000 every year, in perpetuity. Its cost of unlevered equity is 9.5% and it faces a corporate tax rate of 21%. The firm plans to adjust its capital structure by issuing an additional $350,000 in perpetual debt at the same pretax rate of 6.5% and using the proceeds to repurchase shares. Assume the EBIT is not affected by this recapitalization. Part A (5 points): What is the market value of this firm's assets after the recapitalization? The market value of the firm's assets (VL): $ - (Round your answer to two decimal places and use the rounded value in Part B). Part B (5 points): What is this firm's debt-equity ratio after the recapitalization? This firm's debt-equity ratio) (Round your answer to four decimal places and use the rounded value in Part C). Part C (5 points): What is this firm's cost of levered equity after the recapitalization? This firm's cost of levered equity (Rs): %. (Round your answer to one decimal place).