$1.$ Assuming perpetual cash flows in Case II $-$ Proposition I, what is the value of the equity for a firm with following values?:

EBIT $=$ $$50$ million

Tax rate $=30\%$

Debt $=$ $$100$ million

Cost of debt $=9\%$

Unlevered cost of capital $=12\%$

$2.$ Find the cost of equity and the return on assets $($WACC$).$

$3.$ Suppose that the firm changes its capital structure so that the debt$-$to$-$equity ratio becomes $1.$

a$.$ What will happen to the cost of equity under the new capital structure?

b$.$ What will happen to the return on assets $($WACC$)$ under the new capital structure?

$4.$ What happens to the the return an assets $($WACC$)$ as D$/$E increases? Why?

Submit your answers in this folder by the due date and time