1. Firm A has $10 million shares outstanding and selling for Tk.80000 each. It has no debt. Firm Bs perpetual debt has market value of Tk.275000 million and costs eight percent per year. The firm has $4.5 million shares outstanding and currently selling for Tk.125 each. Both the firms A and B are identical in every way except their capital structures and both the firms expect to earn Tk.96 million before interest and taxes per year forever. If the firms pay no taxes, which firms share would be a better buy and explain why? 2. Infinity Inc. is considering increasing the proportion of debt from (current) 29% to $6.8 million in its capital structure. The corporate tax rate of the company is 350%. If the firm does recapitalize, keeping in view the MM propositions, then (i) explain what would be the probable impact of this recapitalization on the firm's existing creditors and stockholders? (ii) Ignoring financial distress cost, indicate the probable impact of the restructuring on the firm's value? iii) what should be the total cost?