1. Assume the following balance sheet information:

	Book Value	Price per unit	# of units	Coupn Rate	Maturity
Bonds	$100,000,000	$1,000	100,000	8%	10 years
Common Stock	$275,000,000	$85	5,000,000
Retained Earnings	$400,000,000

Let the tax rate = 34%. Assume that the beta of the common stock is 1.2, the risk-free rate is 2%, and the market premium is 8%. Assume the firm would like to increase its debt so that its L, the percentage of debt financing, is 45%.

1. Determine the new ATWACOC
2. Determine the new Cost of Equity
3. Determine the new value of the firm if the cash flows may be represented as a perpetuity.

(30 points)