Calculate the cost of equity and the WACC for the firm after the proposed change in its capital structure.

Given the values of levered and unlevered firms, and the WACC of levered and unlevered firms, briefly discuss the optimal capital structure for a firm when there are corporate taxes.

Briefly explain whether your conclusions about the optimal capital structure for a firm are reasonable. If not, briefly discuss the reasons for these unreasonable conclusions.

3) (35 points) XYZ is an all equity financed firm with a constant EBIT of $1.75 million. The company does not pay any taxes currently. The company has a cost of equity of 20% and 500,000 shares outstanding. 3) (35 points) XYZ is an all equity financed firm with a constant EBIT of $1.75 million. The company does not pay any taxes currently. The company has a cost of equity of 20% and 500,000 shares outstanding