a. If the assumption that companies pay no tax in Modigliani & Miller Proposition is relaxed, while the other two assumptions still hold, how will the value of a company be affected? (3 marks) b. The pecking order theory of capital structure suggests that managers will choose to utilise retained earnings before issuing additional debt when financing new projects. Does that imply anything about the flotation costs of issuing new securities? (4 marks) c. Organica Ltd. generates $350,000 cash flow each year. The cost of equity capital is 18% and the company has no debt outstanding. Organica would like to buy back $ 950,000 of its equity by borrowing the same amount at 12% per year. Assume that the debt will continue for an indefinite period and Modigliani and Miller proposition 1 holds, what is the cost of equity capital after the change in capital structure