Silverman Inc. is an all-equity firm that starts making an EBIT of $2000 this year. This EBIT is expected to remain at this level forever. The current Stock price is $40/share. The number of shares outstanding is 1000. The manager is considering a leverage recap. She is planning to raise $10,000 from debt issuance, and use the proceeds to repurchase stocks. The interest rate of the debt is 2% .

1) What is the WACC of the all equity firm? What is the firm value after the leverage recap in a perfect capital market?

2) Rahul, a shareholder of the firm, owns 20 shares of stock before the leverage recap. If Varvara wants to unlever her cashflow from Silverman Inc., what does she need to do?

Please show working and steps