CarKing is a company in the luxury car industry.To verify its performance, the company is using economic value added (EVA), a managerial technique.The EVA for the company has been calculated as $202,545.This amount has been determined with the following information.

Marginal tax rate35%

Cos of debt before tax11%

Cost of equity13.5%

Costs capitalized for Development25%

Costs capitalized for Research30%

Amortization period6 years

Operating Income$445,808

Capital Employed$1,950,000

Total Development Cost$80,000

Total Research Cost$120,000

Goodwill impairment loss included in income$36,500

REQUIRED:

a)Assume that R&D costs for the year occurred on Jan 1. What is the capital structure of Car King?

(Show your work)

b)What would be the new EVA amount if capital structure of the company is 70% debt and 30% equity? (Use 4 decimal places)