Question 5: 7 + 5 = 12 marks Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information; a) Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT Cost of debt Cost of equity when unlevered Tax rate Debt Cost of Equity when levered Equity D/E Vu VL WACC $100,000 11% 18% 31% ie $10,000 $20,000 $30,000 b) Plot the results from the table into the following two graphs: i) Value of the firm vis-a-vis- Total debt ii) Cost of capital of the firm vis-a-vis D/E ratio. iii) Which MM propositions have you demonstrated