Variable costs amount to 60 percent of sales. Annual depreciation of $1.8 million is exactly matched each year by new investment in the...

Variable costs amount to 60 percent of sales. Annual depreciation of $1.8 million is exactly matched each year by new investment in the division"s equipment. The division would be taxed at the parent"s current rate of 40 percent. A. How much is the division worth in unleveraged form? B. If the division had the same capital structure as the parent firm, what return would the equityholders of the division require? C. At this optimal capital structure, what would the division be worth?