a) General Corporation has 100 million outstanding shares with a share price of $5, and it has outstanding debt with a m

[answerhappygod]

a) General Corporation has 100 million outstanding shares with a
share price of $5, and it has outstanding debt with a market value
of $300 million. Investors expect a 6% return on debt and 12%
return on stock. With the consideration of Modigliani and Miller
(MM) Position II without tax,
(i) if General Corporation issues new shares of $300 million to
redeem all outstanding debt, what is the revised expected return of
the stock?
(ii) if General Corporation issues $100 million of new debts to
repurchase 20 million of the stock, what is the revised expected
return of the stock?
b) Katy Corporation wants to have a weighted average cost of
capital (WACC) of 10%. The cost of debt is 5%, the cost of equity
is 12%, and the tax rate is 20%. There is no other capital except
the mentioned debt and equity. With the given information,
calculate the debt-equity ratio to achieve the targeted WACC.
c) Jason Limited has 100 units of outstanding bonds with a
coupon rate of 10%, in which the market price and the face value of
each bond is $2,000. It is expected that the earnings before
interest and tax (EBIT) of the firm would remain constant at
$400,000 each year, and the unlevered cost of capital is at 20%.
Calculate the firm value of Jason Limited with the consideration of
Modigliani and Miller (MM) Proposition 1 with tax if the tax rate
is 25%.