4. Viao Corp. has debt with market value of $60 million. The yield to maturity on the debt is 7%. The probability of default is 1% per year. The expected loss rate conditional on default is 60%. The firm has 3 million shares. Each share is trading at $24. The firm will maintain the same debt to equity ratio in the future. Viao's equity beta is 0.8 . The risk-free rate is 4% and the market risk premium is 10%. The corporate tax rat is 20%. The firm's next free cash flow will be one year from today. Thereafter, the free cash flow will grow annually at 3%. (a) What is the firm's Weighted Average Cost of Capital (WACC)? (b) What is the firm's free cash flow next year? (c) The firm is considering reinvesting more in capital expenditure to reduce free cash flow returned to investors in order to grow faster. The additional investment will earn an after-tax return of 10%. Will this change increase or decrease firm value? Why