$(30$ points$)$ Answer the following brainteasers that are based on thls semester's Corporate Finance course $($FINA $4330)?$

$($a$)$ Suppose that the two streaming platforms, Hhlu and Nethix, have iderfical erpected cash flows and the same operabional risk. Further, Hulu has $40\%$ debt and $60\%$ equity, whereas Nettix has $30\%$ debt and $70\%$ equity. Assume that there are no tax benefits for raising debt, nor is there ary barkrugtoy risk. Also, antume that Bank of America treats Hulu and Netfix as identical customers and otlers them the same debt ribe. Let $D_4$ and $E_H$ represent debi$-$holders and equity$-$holders of Hulu, respectively. Similarly, let $D_w$ and Esudenote debt$-$holders and equity$-$holders of Netfix, respectively.

$($a$\mathrm{.}1)(6$ points$)$ Who ansong $E_m$ and $E_N$ are exposed to more risk? Why?

$($a$\mathrm{.}2)(4$ points$)$ Which firm between Hulu and Netfix is riakier? Why?

$($a$\mathrm{.}3)(2$ point$)$ As a potential buyer, which of the two frms would you valuelpay more?

$($b$)$ Consider the same information as in $2($a$)$ but with a slight modification. In contrast to the previous assumption, assume now that there are tax$-$benefiss for raising debt. But also assume that there are no costs of bankruptcy.

$($b$\mathrm{.}1)(4$ points$)$ Who among $E_{14}$ and $E_H$ are exposed to more risk? Wry$?$

$($b$\mathrm{.}2)(10$ points$)$ Would the equity$-$holders, EH and $E_M,$ face higher risks in this world $($i$.$e$.,$ in the taxworld$)$ compared with their respective risks in the no$-$tax world $($ie$.,$ in question $2$a$)?$ if yes, why? if no$.$ why?

$($b$\mathrm{.}3)(4$ points$)$ Suppose that you have been appointed as the CFO of Netfix. You will have to determine the optimal capital structure $($i$.$e$,$ debt$-$to$-$equity ratio$)$ that maximizes the value of Nettix. in this world, where there are tax$-$benefits for raising debt but with no bankruptcy costs, how much debt would you want to raise for Netflix in order to maximize its value? Why?