Answer the following five questions: a. How does the risk and cost of capital of levered equity compare to that of unlevered equity? Which is the superior capital structure choice in a perfect capital market? Explain (3 points) b. It is not uncommon to hear people say that because debt has a lower cost of capital than equity, a firm can reduce its overall WACC by increasing the amount of debt financing. If this strategy works, shouldn't a firm take on as much debt as possible, at least as long as the debt is not risky? Explain your answer using M&M Proposition II. (3 points) C. In the real world, is there an easily quantifiable debt-equity ratio that will maximize the value of a firm? Why or why not? (4 points) d. Hunter Construction is an all-equity firm that has projected perpetual EBIT of $372,000. The current cost of equity is 13.6 percent and the tax rate is 39 percent. The company is in the process of issuing $988,000 worth of perpetual bonds with an annual coupon rate of 5.6 percent at par. What would be the value of the levered firm? (5 points) Show your calculations to get credit. Answers without numeric calculations will not get credit. e. Blitz Industries has a debt-equity ratio of 1.1. Its WACC is 7.3 percent, and its cost of debt is 5.1 percent. The corporate tax rate is 21 percent. What is the company's cost of equity capital? What is the company's unlevered cost of equity capital? What is the company's unlevered cost of equity capital? (5 points) Show your calculations to get credit. Answers without numeric calculations will not get credit