1. Hardmon Enterprises is currently an all-equity firm with an expected return of 12%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. a) Suppose Hardmon borrows to a point where the debt equity ratio is 0.50. With this amount of debt the cost of debt is 6%. What will be the expected return on equity after this transaction? (5) b) Suppose Hardmon borrows to a point where the debt equity ratio is 1.50. With this amount of debt the cost of debt is 8%. What will be the expected return on equity after this transaction? (5) c) A senior manager argues that it is best to choose a capital structure that leads to the highest expected return on the stock. How would you respond to this argument