8. Dr. Roy Thomson owns the If You Can't Fix It Then Tan It Fitness and Spa that has the capital structure shown below. Dr. Thomson doesn't like debt and so he has never borrowed to finance the company. The term for not having debt is "Unlevered". There are 10,000 shares of stock outstanding Sean O'Connell, an LFC-educated investment banker, comes along and says that they could increase the value of the firm by simply changing the capital structure. The investment banker's proposal is to issue enough debt to buy back half of the outstanding equity. He says that the interest expense of the debt is tax deductible creating something called a "tax shield" which reduces their taxes and increases firm value. Dr. Thomson hires you, being a fine, upstanding financial analyst, to help him with this decision. The company can borrow at 5% interest. Please complete each of the empty cells in the financial statement and question below: a. (12 points 1 pt per box) Levered Debt % Equity % Debt value Equity Value #Shares outstanding Unlevered 0.00% 100.00% $- $100,000 10,000 $25,000 EBIT Interest Expense Pre-tax Income Taxes @ 35% Net Income $25,000 ($8,750) $16,250 EPS (Earnings per share) ROE (Return on Equity) $1.63 16.25% b. Based on the analysis above, would you recommend that Dr. Thomson restructures the firm? Why or why not? (4 points)