Problem 4: (Previous problem with taxes) LY company currently has an all equity capital structure. LY has an expected operating income (EBIT) of $12,000. Assume that this EBIT figure is perpetual, that is to say, EBIT will continue at this same level forever. Its cost of equity (which is also its WACC since there is no debt financing currently) is 11.3 percent. LY company has plans to issue $32,500 in debt at a cost of 5.4 percent in order to buy back a same amount of equity currently held by investors in financial markets. Assume LY company pays corporate taxes at a rate of 25 percent. Hence, we are in the "Modigliani Miller with taxes" world. (a) Calculate the value of the all equity (i.e. unlevered) business. (b) Calculate the value if the LY company after it issues debt. (c) Calculate the D/E ratio before and after the issuance of debt. (d) Calculate the cost of (levered) equity when the LY company has $32,500 debt. (e) Calculate the weighted average cost of capital with the new capital structure