byddande Prakter and Gramble (P) has historically maintained a debt-equity ratio of approximately 0.25. The firm enjoys very stable demand for its products, and consequently can borrow at 4.20%, just hasis points over the risk-free rate of 4%, PG's tax rate is 40%. PO's current asset return (ra) is PG believes it can increase debt without any serious risk of distress or other costs. With a higher debt-equity ratio of 0.50, it believes its borrowing costs will rise only slightly to 4.50%. a) If PG announces that it will raise its debt-equity ratio to 0.5 through a leveraged recapitalization, determine new WACC b) PG is expected to have free cash flows of $10 billion in perpetuity. Determine the increase in the company value that would result from the anticipated tax savings 5. How may hedging increase value of a company? Give 2 reasons. Explain briefly