I need and answer for problem 16 chapter 15 out of Ehrhardt, M. C., Brigham, E. F. Corporate Finance: A Focused Approach. [Chegg]. Retrieved from https://ereader.chegg.com/#/books/9781337910231/ 7^th edition

Start with the partial model in the file Ch15 P13 Build a Model.xlsx on the textbooks Web site. Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown in the following table. Data for the risk-free rate, the market risk premium, an estimate of Reachers unlevered beta, and the tax rate are also shown. Reacher expects zero growth. Based on this infor-mation, what is the firms optimal capital structure, and what is the weighted average cost of capital at the optimal structure? Percent Financed with Debt (wd ) 0% 5% 10% 15% 20% 30% 35% 40% Before-Tax Cost Debt (rd ) 6.0% 6.1% 6.3% 6.7% 10.0% 12.5% 15.5% 18.0% Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202 Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChap nput Data Risk-free rate Market risk premium Unlevered beta Tax rate 4.5% 5.5% 1.1 25.0

Higgs Bassoon Corporation is a custom manufacturer of bassoons and other wind instruments. Its current value of operations, which is also its value of debt plus equity, is estimated to be $200 million. Higgs has zero coupon debt outstanding that matures in 3 years with $110 million face value. The risk-free rate is 5%, and the standard deviation of returns for similar companies is 60%. The owners of Higgs Bassoon view their equity investment as an option and would like to know its value. Start with the partial model in the file Ch15 P14 Build a Model.xlsx on the textbooks Web site, and answer the following questions: a. Using the Black-Scholes option pricing model, how much is the equity worth? b. How much is the debt worth today? What is its yield? c. How would the equity value change if the company used risk management techniques to reduce its volatility to 45%? Can you explain this? d. Graph the yield to maturity on debt versus the face value of debt for values of the face value from $10 to $160 million. e. Graph the values of debt and equity for volatilities from 0.10 to 0.90 when the face value of the debt is $110 mill