Narrative 1. An all equity company is analyzing a proposal to recapitalize the capital structure. The company has hired your consulting firm to help with the analysis. In doing your research and due diligence, you gathered the following information: The company expects FCF of $250,000 for the foreseeable future. The company has an unlevered beta of 0.85. The company has 250,000 outstanding shares. The company faces a corporate tax rate of 27 percent. The company's stock price is $13.16 per share. For your analysis, you use a risk free rate of 2.5% and an equity risk premium of 6%. Your task is to analyze a capital structure that calls for 70% equity and 30% debt. The company will issue bonds at 2.8% and use the proceeds to repurchase equity.

A. What is the beta levered at the proposed capital structure?

B. How much is the company's cost of equity at the proposed capital structure?

C. How much is the company's cost of capital (WACC) at the proposed capital structure?

D. At the proposed capital structure, what is the company's enterprise value?

E. How much debt will the company have to issue to move to the proposed capital structure?

F. How many shares will the company have to repurchase to move to the proposed capital structure?

G. How much is the stock price at the proposed capital structure?

H. Considering only the stock price, will you advise the company to move to the company's capital structure from all equity to equity 70% and debt 30%? Yes or No