Omega Corp. currently has 100,000 shares of stock outstanding but is planning on issuing debt in order to buy back stock. Their EBIT is a constant $1,000,000 regardless of how much debt they issue and they pay all net income out as dividends. Their tax rate is 40%. They have estimated the following costs of debt and costs of equity for various levels of debt. EBIT = 1,000,000 Tax Rate = 40% Share Shares Debt rd rs Net Inc StkValue FirmValue Debt % WACC Price Outstding 0 6.00% 11.00% 600,000 5,454,545 5,454,545 0.00% 11.00% 100,000 500,000 6.30% 11.40% 581,100 5,097,368 8.93% 10.72% 55.97 91,067 1,000,000 6.80% 12.00% 559,200 1,500,000 8.00% 13.00% 4,061,538 5,561,538 26.97% 10.79% 55.62 2,000,000 9.50% 14.50% 2,500,000 11.50% 16.50% 2,590,909 5,090,909 49.11% 3,000,000 14.00% 19.00% 1,831,579 4,831,579 11. What will their Net Income be if they issue $2,000,000 in debt? a. $190,000 b. $324,000 c. $486,000 d. $810,000 12. What will their Stock Value be if they issue $1,000,000 in debt? a. $4,190,000 b. $4,660,000 c. $5,600,000 d. $6,710,400 13. What will their WACC be if they issue $2,500,000 in debt? a. 10.7% b. 11.8% c. 12.7% d. 14.1% 14. What will their Share Price be if they issue $0 in debt? a. $48.62 b. $51.23 c. $54.55 d. $60 15. What will their Shares Outstanding be if they issue $1,500,000 in debt? a. 40,615 b. 55,615 c. 62,374 d. 73,023