Final answer:
The firm's new enterprise value after converting 50% of its financing to debt with a 15% tax rate is $53.75 billion (Option B). This value is obtained by adding the tax shield benefit of $3.75 billion to the original enterprise value of $50 billion.
Step-by-step explanation:
According to Modigliani and Miller (MM) propositions with taxes, the firm's new enterprise value is altered by the tax shield benefit of debt financing. The original equity-financed value of the firm is $50 billion. When the firm decides to finance 50% of its structure through debt, and given a tax rate of 15%, we calculate the tax shield benefit.
The tax shield is computed as the debt amount times the tax rate. So if the firm converts $25 billion ($50 billion * 50%) to debt, the tax shield will be $25 billion * 15% = $3.75 billion. The new enterprise value of the firm is the original firm value plus the tax shield, which equals $50 billion + $3.75 billion = $53.75 billion.
The firm's new enterprise value is Option B: $53.75 billion.