A firm is currently financed 60% by equity and 40% by debt. EBIT is 5 million per year and it is expected to remain constant forever. Each year capital expenditures are equal to depreciation, and the level of working capital is expected to remain constant forever. The firms equity beta is 1.6. The firm has 20 million shares outstanding. The firms debt is risk-free and yields 4%. The market risk premium is 5%. 1) What is the firms Operating FCF? What is its enterprise value? What is the price of each share? What is the asset beta? 2)Suppose that the firm decides to raise an additional 5 million in equity and to use the proceeds to pay off debt. The debt can be paid off at face value. What is the cost of equity after the firm completes these transactions? What is the new WACC? What is the new share price ? Are shareholders better or worse off as a result of the change in capital structure?