2. Capital Structure and M&M Propositions without Taxes (8 points) a) (4 points) Value of the Firm A debt-free firm currently has 400,000 shares of stocks outstanding. The company is considering reducing the number of shares to 300,000. To do this, the company will have to borrow 5 million dollar at 8% interest. Ignoring taxes, what is the value of the firm? b) (4 points) Cost of Equity Firm B has a debt/equity of 0.60. The required return on assets is 12% and the pre-tax cost of debt is 8%. Ignoring taxes, what is the cost of equity