SG: United Producers (UP), an unleveraged firm, has a total market value of $12 million, consisting of 500,000 shares of common stock selling at $24 per share. Management is considering recapitalizing by issuing enough debt so that the firm has a capital structure consisting of 25 percent debt (based on market values) at a before-tax cost of 10 percent. UP will use the proceeds to repurchase stock at the new equilibrium market price. UPs marginal tax rate is 40 percent. It has earnings before interest and taxes (EBIT) of $2.0 million; it expects zero growth in EBIT, and it pays out all earnings as dividends.

1. Regardless of your answer to part c above, assume that UPs levered beta is 1.2. What is the new cost of equity under the capital structure financed with 25 percent debt?
2. Regardless of your answer to part d above, assume that UPs new cost of equity is 11.6 percent. What is its new weighted average cost of capital?
3. Regardless of your answer to part e above, assume that UPs new weighed average cost of capital is 10.2 percent. What is the new total corporate value of UP?
4. Regardless of your answer to part f above, assume that UPs new total corporate value is $11,764,706. What is the new stock price?
5. Regardless of your answer to part g above, assume that UPs new total corporate value is $11,764,706 and its new stock price is $23.53?