A firm can increase its intrinsic value by increasing their ,and decreasing their 1. (2 total points) What happens to the cost of capital (rd & r) in a firm when additional debt is issued? Why? (4 total points) 2. 3. ABC Inc. is a toy manufacturer with a fixed cost of $250,000. The average price per toy is 52o. Each toy has a variable cost of $12.50. What is the quantity break even for ABC Inc.? (4 total points) 4. ABC Inc. is looking at recapitalizing its current structure. The firm currently has no debt. It has an unlevered beta of 1. The current risk free rate is 5 % with a market risk premium of 6 %. The firm is expected to generate free cash flows of $35 million at an expected zero growth rate. The company has no short term investments, no preferred stock, and 10 million shares outstanding. If the firm decided to recapitalize with a new capital structure of 30 % debt and 70% equity , the bank would provide the firm with a loan at 8 %. If the company recapitalizes, it will use the proceeds from debt issuance to repurchase stock. The firm's tax rate is 40 % . Based on this information, what is the firm's Weighted Average Cost of Capital, Value of Operations, and price per share after the repurchase? (10 total points)