EBIT FOR THIS QUESTION = 800000

The Teenie Tiny Company is currently an un-levered firm with a beta of 1.3925. Since this is a start-up company with significant impact on the social well-being of the country, the firm was given a tax- exempt status for the first five years of operation. In the market, you observe that the latest Government of Canada T-bill issue is yielding 3% and the market risk premium is 8%. 1. Assume that there is no cost for the risk of default (all debt will be issued with a 5% coupon interest rate. e) If the firm issues $2,000,000 in debt, calculate the total value of the firm, cost of equity, and the WACC (8 marks) f) Graph the results of your calculations. (2 marks)