HI finance experts,

i need help with the below assignment kindly help!!

CORPORATION Midcity Corporation was a producer of a broad line of and women's clothing. However, Mldcity was not Widely recognized by the public because its products almost always carried someone else's name. Almost half of Midcity's sales went to two department store chains, with the other half Of sales being divided among several dozen smaller contracts. While Midcity had maintained i major sales relationships for over two decades, there were no long term contracts. The customers could, in theory, shift: to a new supplier with no obligations other than contracts calling for 10.7* 12.2* 15.5% delivery over a period of no more than a reason for the firm's low sales growth firm's performance for the previous year year . This was the main and market va The is summarized below: Sales Variable costs Fixed costs $10 , 000 , 000 3 , 000, 000 3 , 000 , 000 Net operating income modernizati on progran was part Of management' s plan to increase the f value. A plant modernization would allow Midcity to price aggressively and be more profitable in the highly competitive markets in Which t operated. The modernization would not add significantly to capacity. To complete the modernization program, Midcity needed $10 million of new external capital The modernization was expected to increase net operating income by per year. Based on the firm's research, the risktree rate was and the Midcity had no longtern debt probability of default will be as Additional Debt $1,000 , ooo $2. , ooo $3 , 000 , 000 $4 , 000, 000 $5,000 , ooo Midcitys equity was I. 25, expected market return was 12%. With debt , the outstanding . follows: probability Of Default It was estimated that the cost Of loan default would be $3 million. Midcity was in a tax bracket. What should be the optimal debt and equity nix for the $10 million?