A firm has 2.25 million shares of common stock outstanding with a market price of $20 per share. It has 25,000 bonds outstanding, each selling for $1,100. The bonds mature in 12 years, have a coupon rate of 8.5%, and pay coupons annually. The firm expects its next year dividend to be $2.92 and expects it to grow at 3% in perpetuity. The stock price is currently $20. The firm's tax rate is 35%. You may assume the bonds have a $1,000 face value each.

a.Solve for the firm's market value capital structure (mix of debt and equity).