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Keiretsu Inc has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million

Keiretsu Inc has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The Japanese Treasury bill is yielding 4% and the market risk premium is 8%. Keiretsus tax rate is 35%. A. What is Keiretsus cost of equity (Re)? B. What is Keiretsus AFTER-TAX cost of debt (Rd)? C. What is Keiretsus proportion of debt (Wd)? D. What is Keiretsus proportion of equity (We)? E. Is there an easily identifiable debt-equity ratio that will maximize the value of a firm? Why or why not? F. What is Keiretsu's weighted average cost of capital (WACC)?

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