Capital Structure Analysis

Pettit Printing Company has a total market value of $100million, consisting of 1 million shares selling for $50 per shareand $50 million of 10% perpetual bonds now selling at par. Thecompany's EBIT is $13.66 million, and its tax rate is 25%. Pettitcan change its capital structure either by increasing its debt to60% (based on market values) or decreasing it to 40%. If it decidesto increase its use of leverage, it must call its oldbonds and issue new ones with a 14% coupon. If it decides todecrease its leverage, it will call in its old bonds andreplace them with new 9% coupon bonds. The company will sell orrepurchase stock at the new equilibrium price to complete thecapital structure change.

The firm pays out all earnings as dividends; hence, its stock isa zero growth stock. Its current cost of equity, r_s, is14%. If it increases leverage, r_s will be 16%. If itdecreases leverage, r_s will be 13%.

Present situation (50% debt):
What is the firm's WACC? Round your answer to three decimalplaces.
     %
What is the total corporate value? Enter your answer in millions.For example, an answer of $1.2 million should be entered as 1.2,not 1,200,000. Round your answer to three decimal places.
$    million

60% debt:
What is the firm's WACC? Round your answer to two decimalplaces.
     ? %
What is the total corporate value? Enter your answer in millions.For example, an answer of $1.2 million should be entered as 1.2,not 1,200,000. Round your answer to three decimal places.
$    million

40% debt:
What is the firm's WACC? Round your answer to two decimalplaces.
     ? %
What is the total corporate value? Enter your answer in millions.For example, an answer of $1.2 million should be entered as 1.2,not 1,200,000. Round your answer to three decimal places.
$   million