Q2 Problems (25 points) 1. The company A has 10 million shares of common stock outstanding. The stock currently trades at $4.85 per share. The company also issues 10 million debt with 7% nterest rate ad will be repaid in net two years. average cost of capital is 10.5 percent. The tax rate is 35 percent a. Construct company A's market value balance sheet b. What is the company's cost of equity capital? c. What is the company's unlevered cost of equity capital? d. Company A is thinking to invest on a project cost $5 million. Should the company choose deb The firm can also obtain debt with the same interest rate in the fusture Company A's weighted financing or equity financing assume the financial distress cost is zero? How about if the financial distress cost is not zero