Question 1
What is the value of the firm according to MM with corporate taxes if the following is true?
EBIT: $200,000
rd: 14%
Tc: 35%
Debt: $600,000
rsU: 17%
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$965,875
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$974,706
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$987,500
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$996,250
Question 2
What should the firm’s target capital structure be set to do?
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minimize the cost of preferred stock
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minimize the weighted average cost of capital (WACC)
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minimize the cost of equity (rs)
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minimize the cost of debt (rd)