Bright Shine Jewellery (BSJ) has 2 million shares outstanding. The current share price is $46. BSJ has no debt. Hillary, the financial manager, determined that the firm can borrow at 6%. The tax rate is 20%. BSJ's earnings before interest and taxes are $17.25 million per year and they are expected to continue in perpetuity.

a.What is the unlevered cost of capital? (4 marks)

b.Hillary decides to borrow 55.2 million and buy back common shares. What will be the value of the levered firm? (4 marks)

c.What will be the value of the equity after leverage? (4 marks)

d.What will be the price per share after the leverage? (4 marks)