=+e. (1) Assuming that the debt financing costs do not change, what effect would a shift to a more highly leveraged capital structure consisting of 50% longterm debt, 0% preferred stock, and 50% common stock have on the risk premium for Eco’s common stock? What would be Eco’s new cost of common equity?

(2) What would be Eco’s new weighted average cost of capital (WACC)?

(3) Which capital structure—the original one or this one—seems better? Why?