a. Why capital structure theory is relevant? (4 marks)

b. On 30 June 2021 you obtained the following information for J Ltd: The estimated company cost of capital under an imputation system of tax to be applied to cash flows after tax is 10% (assuming the effective tax rate is 30%) The free cash flows before tax for the year ended 30 June 2021 are: Cash receipts from operations $543m Less cash payments from operations $434m Less net cash flows investment activities $ 43m Free Cash flows before tax $ 66m The number of shares outstanding 231.46 million The net debt reported in the statement of financial position (balance sheet) is $141.5 million Federal treasury was forecasting economic growth after COVID-19 of 4.5% for the year ended 30 June 2022. Required: Assuming that the free cash flows of J Ltd are sustainable and are expected to grow perpetually at the current forecast long term nominal interest rate, estimate the value of each share.