11) (Assume perfect and complete world with tax). Eco Light's current sources of financing are as below: $500m 7% annual coupon, 5-year bond outstanding. The current price of the bond is 96%. O 50 m shares of par value $1, trading at a current price of $12/ share. Retained earnings of $200 m. B=1.25 for firm's stock, risk-free rate of 4%, market premium of 8%, and tax rate of 35%. The firm is considering issuing additional bond and use the proceedings to buy back shares to get to debt leverage of 50%. 1. What are D/E ratios under the current capital structure and the proposed one? 2. What is the firm's current WACC? 3. What will be the firm's cost of equity after the change in capital structure? 4. What will be the firm's WACC after the change in capital structure? 5. From your calculation, does WACC change in the same direction as cost of equity? Do we have the same results in a perfect world? Why do you think that's the case