1. Answer the problem based on the Modigliani and Miller's framework. Ignore bankruptcy costs (or costs of financial distress), transaction costs, and signaling effects from the debt financing. An all-equity (unlevered) has expected annual earnings before taxes of $60,000,000 forever. The firm's current required rate of return is 15 percent. The current number of common shares outstanding is 3,000,000. The firm's tax rate is 25 percent. Assume that all earnings are distributed as dividends at the end of each year. The company is considering a leveraged recapitalization plan. It will issue $50,000,000 perpetual debt at 8 percent pre-tax interest rate (cost of debt) and use the proceeds from the debt issue to buy back common shares. Assume that the stock price reflects the value of the financing side effects immediately after the announcement of the recapitalization plan. a) What is the value of the company before the announcement of the recapitalization plan? b) Compute the stock price per share before the announcement of the recapitalization plan. c) Calculate the value of the firm after the announcement of the recapitalization plan using the adjusted present value (APV) approach. d) Find the stock price per share after the announcement of the recapitalization plan. e) How many shares will the firm buy back using the proceeds from the debt issue? What is the number of common shares outstanding after the completion of the recapitalization? f) Find the new value of equity after the share repurchase