Please show formulas and the full work without the use of excel.

1. (35 points) Your firm wants to increase its use of debt in order to increase tax shield. Currently, the firm has $50 million in debt outstanding, $50 million common equity. The firm wants to raise enough debt to repurchase $10 million in common equity. The firm also wants to raise $10 million in debt to fund a new project (project C) and $10 million in debt to expand a current project (project B). You need to determine by how much WACC will change if the firm takes these actions. The firm's debt beta is 0.3 and the cost of debt is 8%. The market return is 15% and the risk-free rate is 5%. The firm has only two projects currently. The firm has invested $20 million in project A, which has a beta of 1.2. The firm has invested $80 million in project B, with a beta of 1.80. Project C has a beta of 1.56. The firm's common equity currently has a correlation of 0.7 with the market, and a standard deviation of 71.7, but this is subject to change when the firm changes its characteristics. The markets variance is 400. The tax rate is 40%. If the changes will not change the debt beta/cost of debt, by how much will the WACC change? 1. (35 points) Your firm wants to increase its use of debt in order to increase tax shield. Currently, the firm has $50 million in debt outstanding, $50 million common equity. The firm wants to raise enough debt to repurchase $10 million in common equity. The firm also wants to raise $10 million in debt to fund a new project (project C) and $10 million in debt to expand a current project (project B). You need to determine by how much WACC will change if the firm takes these actions. The firm's debt beta is 0.3 and the cost of debt is 8%. The market return is 15% and the risk-free rate is 5%. The firm has only two projects currently. The firm has invested $20 million in project A, which has a beta of 1.2. The firm has invested $80 million in project B, with a beta of 1.80. Project C has a beta of 1.56. The firm's common equity currently has a correlation of 0.7 with the market, and a standard deviation of 71.7, but this is subject to change when the firm changes its characteristics. The markets variance is 400. The tax rate is 40%. If the changes will not change the debt beta/cost of debt, by how much will the WACC change