Please show all work and calculations in excel. Please show formulas used in excel.

A D E F G H K Problem 3: Capital Structure Analysis The Erhart Company has no debt outstanding, and its financial position is given by the data below. The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity will increase by 11% to reflect the increased risk. Bonds can be sold at a yield of 7%. Erhart is a no-growth firm (just makes things easier - you can use a the perpetuity formula with zero growth). Hence, all earnings are paid out as dividends. Earnings are expected to be constant over time. a) What effect would this use of leverage have on the value of the firm? b) What would the price of Erhart's stock be? c) What happens to the firm's earnings per share after the recap? d) The $500,000 EBIT (see below) is actually the expected value from a probability distribution (also see below). Determine the times-interested-earned for each probability. What is the probability of not covering the interest payment at this 30% debt level? This question makes use of formulas found in Chapter 15-7. A good example to work through! Financial Information Assets (MV = BV) EBIT Cost of Equity Stock Price (Before Recap) Shares Outstanding (Before Recap) Tax Rate $3,000,000 $500,000 10% $15 200,000 40% Prob. 10% $ 20% $ 40% $ 20% $ 10% $ EBIT (100,000) 200,000 500,000 800,000 1,100,000