Eutelsat S.A. is a European satellite operator. It provides satellite telecommunication services. It has an operating income (EBIT) of $5 million along with a debt of $2 million which consists of perpetual bonds. The company has 6000,000 shares outstanding. Its cost of debt is 10% and the cost of equity is 15%. Considering that the firms market is stable it expects that there is no growth, it pays out all the earnings as dividends. Its tax rate is 40%

. A. What is the total market value of the firms stock, its price per share, and the firms total market value?

B. What is the firms weighted average cost of capital (WACC)?

C. The firm can increase its debt by $8 million, to a total of $10 million, using the new debt to buy back and retire some of its shares. Its interest rate on all debt will be 12 percent (it will have to call and refund the old debt), and its cost of equity will rise from 15 to 18 percent. If the operating income (EBIT) remains the same, should the firm change its capital structure?

D. If the firm did not have to refund the $2 million of old debt, how would this have affected value of the firms stock, its price per share, and the firms total market value (Show your calculations)? Assume that the new and the old debt are equally risky, with kd = 12%, but the coupon rate on the old debt is 10 percent.

E. What is the firms Times Interest Earned (TIE) ratio under the original conditions and under the conditions in Part C?