Smith is an unlevered firm and expects to generate $140 in earnings before interest and taxes in perpetuity. The corporate tax rate is 20% and the cost of equity capital is 25%. All earnings after tax are paid out as dividends. a) Compute the market value of Smith equity. [20 marks] b) Smith is considering a capital restructuring to allow $100 of debt. The cost of debt capital is 8%. Compute the value of Smith and the cost of equity after the restructuring. Comment on your results. [25 marks] c) How does the weighted average cost of capital change with debt restructuring? Comment on your results. [25 marks] d) Explain under which conditions: i) An announcement of an increase in the dividend payment is viewed negatively by the market; ii) An announcement of a share repurchase is viewed positively by the market. (Word limit 300 words) [30 marks]