DARKSENT INC currently is a cloud computing firm but is considering expanding into

producing laptop customers. In its current form, Darksent has a WACC of $9\mathrm{.}8\%$ and

they have a target capital structure of $40\%$ and $60\%$ equity $.$Darksent also has a tax rate

of $20\%.$

Darksent realizes that using its current WACC is to evaluate an expansion into this new

line of business is not good practice. Therefore, it has gathered data on two firms that

has expanded into other sector of the cloud computing business to guide their

calculations of an appropriate cost of capital. Using this data, calculate a cost of equity

for Darksent proposed expansions into computer manufacturing. Company A and

Company B have a tax rate of $30\%.$ Assume a risk free rate of $4\mathrm{.}0\%$ and a market risk

premium of $7\%.$

B$.$ If Rarksent uses a pre tax cost of debt is $7\%$ for their laptop divisions and their tax

rate is $20\%,$ what is the cost of capital$($WACC$)$ they should use to evaluate this

expansion?

C$.$ Suppose Darksent has conducted an EBIT$-$ EPS analysis, and the breaker EBIT is

determined to be $$34$ million. Suppose their average EBIT is $$42$ million with a standard

deviation of $$8\mathrm{.}5$ million. What is the chance Darksent will not earn their breakeven

EBIT? What does EBIT$-$EPS analysis suggest about the risk of choosing debt as

opposed to equity?$(3$ points$)$

Can you please walk me through this step by step? You will have to unlever and then relever the beta right since its expanding