Problem 9 Capital structure analysis PPT company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $13.24 million, and its tax rate is 15%. The firm can change its capital structure by either increasing its debt to 70% or decreasing it to 30%. If it decides to increase its use of leverage, it must call its old bonds and issue new ones with a 12% coupon. If it decides to decrease its leverage, it call its old bonds and replace them with new 8% coupon bonds. The company will sell or repurchase stock at new equilibrium price to complete its capital structure change. The firm pays out all earnings as dividends; hence its stock is zero-growth stock. Its current cost of equity is 14%. If it increases the leverage, cost of equity will be 16%. If it decreases leverage cost of equity will be 13%. What is the firm's WACC and value under each capital structure