2) Question 4 (7 marks) Copper Inc. (CI) and Nickel Inc. (NI) operate in the same industry, and they both encounter the same macroeconomic forces. For CI and NI, the capital structure and expected operating earnings for a typical year, a good year, and a poor year, are as follows: Capital structure CI NI Common shares $ 250,000 $1,400,000 Bonds @ 10% 1,500,000 350,000 $1,750,000 $1,750,000 Expected earnings before interest and taxes CI NI Typical year $225,000 $225,000 Good year $300,000 $300,000 Poor year $165,000 $165,000 Tax rate 35% 35% Required: a) Calculate the earnings available to the common shareholders and the returns on equity for CI and NI for each of the three types of year. (6 marks) c) Explain whether CI or NI should have the higher cost of equity in its capital structure. (1 mark)