HD export company expects its EBIT to be $300,000$ for the next years forever. The firm can

borrow at $2\%$ interest per year. However, currently no debt involved. The cost of equity

is $4\%$ per year. Corporate tax is $($for now$)0\%.$

Required

a$.$ Calculate the value of equity for company.

b$.$ calculate the cost of equity for company.

c$.$ Calculate the company value of when the required return for the shareholders

is $10\%.$

d$.$ Calculate the value of the company when the plan of issuing bonds

for $100,000$ at $6\%$ is executed.

e$.$ Calculate the WACC of company after issuing the bonds successfully.

f$.$ Calculate the Return on equity of company after issuing the bonds successfully.

g$.$ What effect will issue debt have on the value of the company and the WACC?

h$.$ Why can't the MM$\text{'}63$ theory be the ultimate capital structure theory?

i$.$ Name one example of a factor that affects the value of the company $($and the

WACC$)$ negatively which is not included in the theory of MM$\text{'}63.$