Magic Machines Inc. (MM), a mature industrial company, expects an earning of $120 million next year (year 1) from its existing assets, which will continue perpetually. MM has no growth opportunities and will payout all its earnings. There are no corporate taxes. The cost of capital for MMs assets is 12%. The risk-free interest rate is 4% (for all maturities). Suppose MM is initially 100% equity financed, i.e., 100% owned by its shareholders. MMs total value of equity is 1000 Million. Suppose that MM intends to finance itself with partial equity and partial debt. It can issue a perpetual debt with annual risk-free interest payment of $8 million. the present value of this debt is 200 million 1) Suppose that MM Inc issues this debt and uses the cash raised to pay off equity holders (retiring part of equity). 2)What is the present value of MMs assets? 3)What is the expected total annual payment to the equity holders? 4)What is the present value of MMs debt? 5) What is the change of total value of MM from before (when it was all equity financed)? 6)What is MMs debt-to-equity ratio after this refinancing? 7) What is the total present value for the equity holders after this refinancing operation? Note: The total value should include both the value of the cash payment they received and the value of the remaining equity in MM.