1. Use the following information to answer the questions. Case I: Capital structure (no corporate tax) Debt-to-firm value (D/V): 0% Cost of equity: 10% Cost of debt: 6% Case II: Capital structure (corporate tax) Debt: $0 million EBIT: $40 million Tax rate: 50% Unlevered cost of capital: 10% 1) In Case I, when the debt-to-firm value (D/V) increases from 0% to 50%, i) Figure out the new cost of equity. (30points). ii) Figure out the old WACC with zero debt. Figure out the new WACC with debt of 50%. (30points). 2) In Case II, when the debt increases from $0 to $60mil., i) Figure out the levered firm's value. (30points) ii) Figure out the optimal capital structure. In other words, does the capital structure affect the WACC? (30points)