) Rendezvous Ltd. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Bruce will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization?b) Provide at least two circumstances, where interest tax-shield will have no value for a company.c) Your firm has a debt-equity ratio of 0.60. Your cost of equity is 11 percent and your after-tax cost of debt is 7 percent. What will your cost of equity be if the target capital structure becomes a 50/50 mix of debt and equity

a) Rendezvous Ltd. expects its EBIT to be $100,000 every yearforever. The firm can borrow at 11 percent. Bruce currently hasno debt, and its cost of equity is 18 percent. The tax rate is31 percent. Bruce will borrow $61,000 and use the proceeds torepurchase shares. What will the WACC be after recapitalization?b) Provide at least two circumstances, where interest tax-shieldwill have no value for a company.c) Your firm has a debt-equity ratio of 0.60. Your cost of equityis 11 percent and your after-tax cost of debt is 7 percent. Whatwill your cost of equity be if the target capital structurebecomes a 50/50 mix of debt and equity?Question 2: 10 marksa) Everystate Inc. is evaluating an extra dividend versus a sharerepurchase. In either case, $9,000 would be spent. Currentearnings are $1.30 per share and the stock currently sells for$64 per share. There are 1,000 shares outstanding. In answeringthe questions that follow, ignore taxes for the first two:i) Evaluate the two choices in terms of…

Calvert Corporation expects an EBIT of $25,100 every year forever. The company currently has no debt, and its cost of equity is 15.2 percent. The company can borrow at 10 percent and the corporate tax rate is 24 percent. a.    What is the current value of the company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b-1.    What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b-2.    What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)c-1.    What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,…

(b) Iron Corporation currently has no debt on its balance sheet. Iron's marginal tax rate is 30% and the cost of debt is 7%. () If Iron were to issue sufficient debt to reduce its taxes by $100 million per year permanently, how much debt would Iron need to issue? What would be the value of the tax shield? (i) Iron plans to borrow $5 billion on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. Investors pay a tax rate of 35% on their interest income and 15% on their income from capital gains and dividends. Calculate the present value of the interest tax shield from this recapitalization from an investor's perspective.