5. Maxim Enterprises currently has the following capital structure (with associated costs): Market Value Cost of Component (after taxes) Debt = $400.00 2.40% Equity = $600.00 9.30% Capital $1000.00 6.54% The company is expected to generate $48 million in operating income next year and face a marginal tax rate of 40% on taxable income. If Maxim borrows $400 million and buys back stock, you believe that this will double the pre-tax cost of debt. Estimate the cost of capital for the firm after the recapitalization. (The risk free rate is 3% and the equity risk premium is 5%.) (4 points)