Problem 6 (10 Points) 1. Calculate the nominal and effective annual costs of non-free trade credit under the following terms. Assume payment is made either on the due date or on the discount date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/20, net 45 e. 2/15, net 30 Problem 7 (15 Points) The A. J. Croft Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its EBIT are $100,000, and it is a zero-growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price of $60.00 per share. a. What is AJC's current total market value and weighted average cost of capital? b. The firm is considering moving to a capital structure that is comprised of 40% debt and 60% equity, based on market values. The new funds would be used to replace the old debt and to repurchase stock. It is estimated that the increase in riskiness resulting from the leverage increase would cause the required rate of return on debt to rise to 7%, while the required rate of return on equity would rise to 9.5%. If this plan were carried out, what would be AJC's new WACC and total value? c. Now assume that AJC is considering changing from its original capital structure to a new capital structure with 50% debt and 50% equity. If it makes this change, its resulting market value would be $820,000. What would be its new stock price per share? d. Now assume that AJC is considering changing from its original capital structure to a new capital structure that results in a stock price of $64 per share. The resulting capital structure would be a $336,000 total market value of equity and a $504,000 market value of debt. How many shares would AJC repurchase at this recapitalization