Q 10. (8) Consider the following two-period, two-state world: DELTA Inc. has a discount debt of which the promised payment at maturity is $50. a. Assuming that there are no taxes, show that the value of DELTA ( debt and equity combined) is equal to the value of an unlevered firm which is otherwise identical with DELTA Inc. It is often argued that debt is a cheaper source of financing than equity. Explain the statement. (Hint: Find the equity cost of capital.) b. If corporate income I taxed at 40% but personal income is tax-free, find the values of the debt, equity, and the firm. Is it beneficial to go into debt? Why or why not? Explain c. When both corporate and personal income are taxed at the same flat rate of 40% (but personal income from equity investment is tax-free ), find the values of the debt, equity, and the firm. Show that the value of the firm is independent of its capital structure. Explain why