Problem 1 (**Please type out answers and calculations**Calibri (Body) font with no colours if using print- screen for graphs**Thank you!) The Teenie Tiny Company is currently an un-levered firm with a beta of 1.3925. Since this is a start-up company with significant impact on the social well-being of the country, the firm was given a tax-exempt status for the first five years of operation. In the market, you observe that the latest Government of Canada T-bill issue is yielding 3% and the market risk premium is 8%. This is the last year for the company's tax-exempt status. Assuming that the tax rate will be 40% and that there is no cost for the risk of default. Use the following table to answer these questions: Value of Debt RD Beta EBIT 800,000 0 5.0% 1.392500 Tax Rate 40% 250,000 5.0% 1.483015 T-bill Rate 3.0% 500,000 5.0% 1.542274 TSX 11.0% 750,000 5.0% 1.607016 1,000,000 5.0% 1.678038 1,250,000 5.0% 1.756303 1,500,000 5.0% 1.842075 1,750,000 5.0% 1.939488 2,000,000 5.0% 2.047619 a) b) c) Calculate the required rate of return for the un-levered firm. (Show your work!) Calculate the market value of the un-levered firm in proposition I. (Show your work!) Calculate the WACC for an un-levered firm in proposition II. (No calculation required) d) Using the information from the table, calculate the value of the firm (proposition I), cost of equity, and the WACC (proposition II) of the firm for each level of debt. (Show your work!) e) Debt 250,000.00 500,000.00 750,000.00 1,000,000.00 1,250,000.00 1,500,000.00 1,750,000.00 2,000,000.00 WACC Un-levered TD Levered Wd r*(1-T) We re Equity Using the information from your calculations draw the graphs for proposition I and proposition II. (Show your work!)