1. Cosmos Coffee is considering a capital restructuring proposal. The firm currently has 25 million common shares outstanding with a market value of $40 per share. The company also has $400 Million in perpetual coupon bonds paying interest at 8% (paid out once a year every year, forever). The yield on the debt is also 8% (stated as an APY). The firm is considering restructuring by issuing new perpetual debt worth $600 Million and using this to repurchase stock at the market price. The interest on the new debt will also be 8%. Earnings before interest and taxes (EBIT) for the firm is $125 Million (every year, forever), and the firm pays out its full Net Income as a dividend every year. a) If there are no taxes, what are the companys return on equity (Re) and return on assets (Ra) before the restructuring? b) If there are no taxes, what will the effect of the proposed restructuring be on earnings per share (EPS)? c) If there are no taxes, what will the effect of the proposed restructuring be on the companys required return on equity and the value of the firms stock? d) If the firm instead had to pay taxes at a 34% rate, what would the total (levered) value of the firm be before and after the capital restructuring? (Assume the return on assets, Ra, is the same as derived above in part a)