China's Manufacturing, a large leisure$-$time company, that owns three casinos in Atlantic city and over $300$

fitness centers had debt outstanding of $$1\mathrm{.}180$ billion in $2020,$ and $45\mathrm{.}99$ million shares outstanding, trading at

$$9$ per share. The debt is rated B$-$ and commands a pre$-$tax interest rate of $10\mathrm{.}31\%.$ The company had $$236$

million in earnings before interest, taxes and depreciation in $2020,$ and depreciation of $$109$ million. $($Capital

expenditures amounted to $$125$ million in $1993.)$ The stock had a beta of $2\mathrm{.}20.$

China's is planning to pay down debt and reduce its debt ratio $($D$/($D$+$E$))$ to $50\%,$ which should raise its debt

rating to $A($and lower the pre$-$tax rate to $7\mathrm{.}51\%).$ The tax rate for the firm is $40\%.$ The treasury bond rate is $7\%.$

a$.$ What is China' current cost of capital?

b$.$ What will the effect of the debt reduction be on the cost of capital?

c$.$ The firm value is expected to increase by $$100$ million as a consequence of the debt reduction. Assuming that

the firm is in steady state, what is the expected growth rate in cash flows to the firm that will yield this value

increase?