Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital st

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Optimal Capital Structure with Hamada
Beckman Engineering and Associates (BEA) is considering a change
in its capital structure. BEA currently has $20 million in debt
carrying a rate of 6%, and its stock price is $40 per share with 2
million shares outstanding. BEA is a zero-growth firm and pays out
all of its earnings as dividends. The firm's EBIT is $13 million,
and it faces a 25% federal-plus-state tax rate. The market risk
premium is 6%, and the risk-free rate is 5%. BEA is considering
increasing its debt level to a capital structure with 45% debt,
based on market values, and repurchasing shares with the extra
money that it borrows. BEA will have to retire the old debt in
order to issue new debt, and the rate on the new debt will be 11%.
BEA has a beta of 1.0.
Beta:
Cost of equity: %
%
What is the total value of the firm with 45% debt? Do not round
intermediate calculations. Enter your answer in millions. For
example, an answer of $1.234 million should be entered as 1.234,
not 1,234,000. Round your answer to three decimal places.
$ million