Part 1: (6 marks) Porter Productions sells video tapes for S15.00 each. Their variable cost per unit is $9.00. In addition, they incur S180,000.00 in fixed costs each year a. What is the Porter's annual breakeven point in sales revenue? (2 marks) b. How many units will Porter have to produce and sell in order to generate an operating income (revenues minus expenses) of S54,000? (2 marks) c. At 40,000 units of sales, what is the degree of operating leverage (DOL)? (2 marks) Part 2: (14 marks) Monroe Inc. is an all-equity firm with 500,000 shares outstanding. It has $2,000,000 of EBIT and EBIT is expected to remain constant in the future. The company pays out all of its earnings, so earnings per share (EPS) equal dividends per share (DPS), and its tax rate is 40% The company is considering issuing $4250,000 worth of bonds carrying a 9% coupon rate and using the proceeds to repurchase stock. Bonds will be issued at par. The risk-free rate is 4.5%, the market risk premium is 5.0%, and the firm's beta is currently 0.90. However, the CFO believes the beta would rise to 1.10 if the recapitalization occurs. Assuming the shares could be repurchased at the price that existed prior to the recapitalization, what would the price per share be following the recapitalization? Should Monroe proceed with its plan? Explain