Value of the corporation with a all-equity capital structure

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DATA:
Trans Inc is an American corporation, however its shareholders cannot utilise franking credit that they receive with dividends from the corporation.The corporation consistently generates EBIT of USD 2,800,000 and corporation income tax applicable in USA is 22%. The corporation is currently an all-equity financed (Cost of equity pegged at 11%). The Board of Directors (BoD) are evaluating a proposal to float bonds worth USD 5,600,000 carrying interest at 8% with an intention to repurchase issued shares.
Evaluate;
1- Value of the corporation with an all-equity capital structure?
2- Value of the corporation if the BoD accepts the proposal to float bonds and repurchase shares.?
3- Summarise key points differentiating financial structure and capital structure.
4- Lay down assumptions governing irrelevance hypothesis of capital structure 

Reference no: EM13868007

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