Ingles Inc., is an all-equity firm. The company has a market cap of $250M. The company is considering issuing $100M of debt to repurchase stock; the debt will be kept perpetually at $100M; interest on the debt is 7.0%. The company pays taxes at 20%.

1. What is the value of the levered firm after this recapitalization, and what is the market cap of the equity in the levered firm? (Ignore effects of financial distress)

2. If the cost of equity before the recapitalization was 11.0%, what return will equity investors require in the newly capitalized firm? (Again, ignore effects of financial distress)

3. What was the WACC of the original unlevered firm, and the newly capitalized firm? (Again, ignore effects of financial distress)