Question-7 (10 Points) OF Corporation (an all-equity financed firm) is contemplating about changing its capital structure. It plans to have 35% debt in the proposed capital structure. Currently, there are 7600 shares outstanding and the price per share is $55. EBIT is expected to remain at $36,000 per year forever. The interest rate on new debt is 8%, and there are no taxes. Which capital structure should Mr. ABC, a shareholder of the firm, prefer? He owns 100 shares of OF Corporation. Assume that dividend payout ratio is 100%. Question-8 (10 Points) The relationship between capital structure and firm value can be represented as follows: The X-axis represents the proportion of debt in capital structure and y-axis represents firm value. Briefly explain why the impact of capital structure on firm value is negative initially, then it turns positive and finally it becomes negative again