Question $4.(19$ points$)$

A firm with financial leverage of $50\%$ has a return on common equity $($ROCE$)$ of $20\%$ and a return on net operating asset $($RNOA$)$ of $15\%.$ The firm currently has $$200$ million of net debt.

$4$a$).$ What is the net after$-$tax borrowing cost $($NBC$)$ on the firm's net debt? $(7$pts$)$

The firm is considering repurchasing $$100$ million of its stock and financing the repurchase with further borrowing at the current after$-$tax borrowing cost.

$4$b$).$ what is the firm's new financial leverage? $(7$pts$)$

$4$c$).$ What is the firm's new ROCE, if the same level of operating profitability $($RNOA$)$ is maintained? $(5$pts$)($Note that even if you did not figure out part $($a$),$ you can still pursue this part by assuming a certain number for the firm's NBC$.)$