problem: Consider the following information for an unlevered firm U:
EBIT = $1,600 annually
Unlevered value VU = $4,000
Tax rate = 34 percent
Cost of debt = 10 percent
A levered firm L in the same business risk class has a debt or equity ratio of 1.
Use the M&M Propositions to find out the
[A] After-tax cost of equity for firms U & L
[B] After-tax WACC for both firms.