Blue Sky Softwares Limited $($BSSL$)$ and Delta Software Consultants Limited $($DSCL$)$ are identical firms in every way except their capital structures. BSSL is an all$-$equity firm and has $18,000$ shares of stock outstanding. The current price is $$35$ per share. The other company, DSCL$,$ uses leverage in its capital structure. The market value of DSCL$\text{'}$s debt is $$85,000,$ and its cost of debt is $9$ percent. Each firm is expected to have an EBIT of $$93,000$ in perpetuity. Ignore Taxes. Assume that every investor can borrow at $9$ percent per year.

a$)$What is the value of Blue Sky Softwares Limited? $(2$ marks$)$

b$)$What is the value of Delta Software Consultants Limited? $(2$ marks$)$

c$)$What is the market value of DSCL$\text{'}$s equity? $(3$ marks$)$

d$)$How much will it cost to purchase $20$ percent of each firm's equity? $(4$ marks$)$

e$)$Assuming each firm meets its earnings estimates, what will be the dollar return to each position in part $($d$)$ over the next year? $(4$ marks$)$

f$)$Construct an investment strategy in which an investor purchases $20$ percent of BSSL$\text{'}$s equity and replicates both the cost and dollar return of purchasing $20$ percent of DSCL$\text{'}$s equity.

$(3$ marks$)$

g$)$Is BSSL$\text{'}$s equity riskier or less risky than DSCL$\text{'}$s equity? Explain $(2$ marks$)$

h$)$Explain the relevance of Modigliani$-$Miller Propositions I and II in capital structure decisions.

$(5$ marks$)$