Testing Supplies Unlimited, Inc. (NYSE: TSLTD) has a total market value of $100 million, consisting of $50 million of common equity and $50 million of 10% perpetual bonds now selling at par, i.e., YTM = 10%. IFMs EBIT is $10 million, and its tax rate is 20%. The company can change its capital structure by either increasing its debt to 60% (based on market value) or decreasing it to 40%. If it decides to increase its use of financial leverage, it must call its old bonds and issue new ones with a 14% coupon. If it decides to decrease its leverage, it will call its old bonds and replace them with new 6% coupon bonds. The firm will sell or repurchase stock at the new equilibrium price to complete the capital structure change. The firm pays out all earnings as dividends; hence its stock is a zero-growth stock. Its current cost of equity, rs, is 16%. If it increases leverage, rs will be 20%. If it decreases leverage, rs will be 12%. Answer the following questions based on the assumptions:

1. Assume that the firm can sell new bonds at par regardless of its leverage ratios.

2. No required investment in capital is needed. Hence, FCF = NOPAT = EBIT (1 T).

3. Assume that the constant growth valuation formula with the growth rate = 0 is appropriate and the value of nonoperating assets is zero.

What is the firms WACC and total corporate value under the 40% debt ratio?

Please show all work.