The Rivoli Company has no debt outstanding, and its financial position is given by the following data: The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a cepital structure with 40% debt based on market yalues, its cost equity, ru will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, Fd, j of 8%. Rivoll is a no-growth firm. Hence, all its earnings are paid out as divide Earnings are expected to be constant over time. a. What effect would this use of leverage have on the value of the firm? I. Increasing the financial leverage by adding debt results in an increase in the firm's value. It. Increasing the financial leverage by adding debt results in a decrease in the firm's value. III. Increasing the financial leverage by adding debt has no effect on the firm's value. b. What would be the price of Rivoli's stock? Do not round intermediate calculations. flound your answer to the ntarest cent. 5 per share c. What happens to the firm's earnings per share after the recapitalization? Do not round intermediate calculations. Round your answer to the nearest cent. The firm its Eps by $ d. The $500,000 EBrt aiven nrevinualu is actually the expected value from the following probability distribution: Determine the bimes-interest-eamed ratio for each probability. Use a minus siga to enter negative values, if any. Do not round intermediate calculations, Round your What is the probability of not covering the internst payment at the 400 tebe level? Do not round intermediate calculations. flound your answer to two decimal ptacet