1. (15 pts) An unlevered firm has 1000 shares outstanding and is worth $10,000. Its EBIT is $1,000. The firm decides to issue $5,000 of perpetual debt @ 4% interest rate and repurchase shares. What will be the common stock required return after the repurchase? (The firm faces a 40% tax rate and has zero costs of financial distress.) (6.857% - Note r_su = 6%, and V_l = V_u + TD = $12,000)

Please include all formulas and steps!! Thank you