5. ABCD, Inc., expects perpetual earnings before interest and taxes of $1.2 million per year. The firm's pre-tax cost of debt is 8% per annum, and its annual interest expense is $200,000. Company analysts estimate that the unlevered cost of ABCD's equity is 12%. ABCD is subject to a 35% corporate tax rate. (Recall that the value of an unlevered firm is the present value of its after-tax earnings) (a) What is the value of this firm? (b) If there are no costs of financial distress or bankruptcy, what percentage of the firm's capital structure would be financed by debt? (c) Is the conclusion in part b applicable to the real world