Pfizer, one of the largest pharmaceutical companies in the United States, is considering what its debt capacity is. In

March, Pfizer had an outstanding market value of equity of $24.27 billion, debt of $2.8 billion, and a AAA rating.

Its beta was 1.47, and it faced a marginal corporate tax rate of 40%.

(a) Estimate current the cost of capital for Pfizer.

(b) It is estimated that Pfizer will have a BBB rating if it moves to a 30% debt ratio and that BBB bonds have a

spread of 2% over the Treasury rate. Estimate the cost of capital if Pfizer moves to its optimal.

(c) Assuming a constant growth rate of 6% in the firm value, how much will firm value change if Pfizer moves its

optimal? What will the effect be on the stock price?

(d) Pfizer has considerable R&D expenses. Will this fact affect whether Pfizer takes on the additional debt?

can some one help with part c and d of this question?