$(15$ points$)$ AGE Corporation's cost of equity capital is $16\%$ whereas the before$-$tax cost

of debt is $8\%,$ and the WACC is $12\mathrm{.}4\%.$

a$.$ If the corporate tax rate is $35\%,$ what is the debt$-$to$-$equity ratio for the firm?

b$.$ What is the company's unlevered cost of equity capital?

Assignment #$1$

Finance $3-$ PFIN

Summer $2024$

c$.$ The equity beta of AGE Corporation is $1\mathrm{.}80$ whereas the beta for debt is $0\mathrm{.}90.$ What is

the company's unlevered beta?

d$.$ What will be the cost of equity capital and its beta if AGE Corporation increases its

debt$-$to$-$equity ratio to $3,$ if$,$ with the recapitalization, AGE Corp's cost of debt is

expected to increase to $10\%?$

e$.$ Calculate the impact of the increase in debt$-$to$-$equity ratio on the WACC of the firm.