Short Answer Instructions: Answer the following question in the space provided. Please show all of your work. I will give partial credit if your work shows you are on the right track. However, I will give no credit if you do not show your work. Please try to be concise. If you need more space, use the backs of the pages and clearly indicate when and where an answer is continued. Round dollar figures to two decimal places (eg. $12.78) and round per cent figures to four decimal places (eg. 0.0826 or 8.26%). (20 points) NH Incorporated currently has a debt ratio of 50%. The total market value of its equity is $10 million, and the market value of its debt is also $10 million. NH Inc. has decided that lower leverage would be optimal, so it is considering restructuring its capital structure by issuing $5 million in equity and using the proceeds to retire debt (repurchase their outstanding bonds). NH Inc. currently has an equity beta of 1.2 and its cost of debt at 4%. The market risk premium is 7% and the risk free rate is 4%. NH Inc. pays no taxes and has no bankruptcy risk. NH Inc.'s cost of debt will not change as a result of the restructuring (no change in bankruptcy risk, so no change in default premiums). a. What is the current WACC for NH Inc.? (5 points).de re= rf + [km)-G] = 4% +(22x7%) = 2124=12.4% WACC + Woro = 124% +0.5 + 4% xoj = 0.882 = 8.2% b. Based on M&M theory, what will be the new WACC for NH Inc. after the financial restructuring? (5 points) the New WACC = old Wall = 8,2% BE=Fatta B & B E = 0.6 +0.6x1/2 = 0.8 1.2= PA+ BAXI REL 0.0480.870.07 0.096. PA: ob WALL: 9.6%65% +4%*35 = 0.0764 c. What will the new equity beta of the firm be? (5 points) 0b34 re=14+B [Elrat 12 d. What will the new cost of equity for the firm after restructuring? (5 points)