The Rivoli Company has no debt outstanding, and its financial position is given by the following data Assets (Market value$3,000,000 book value) EBIT Cost of equity, rs Stock price, Po Shares outstanding, no Tax rate, T (federal-plus- state) The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 35% debt based on market values, its cost of equity rs will increase to 129 to reflect the increased risk. Bonds can be sold at a cost, rd, of 7%. Rivoli is a no-growth firm. Hence, all its earnings are paid out as dividends. Earnings are expected to be constant over time. a. What effect would this use of leverage have on the value of the firm? $500,000 10% $15 200,000 40% I. Increasing the financial leverage by adding debt has no effect on the firm's value II. Increasing the financial leverage by adding debt results in an increase in the firm's value III. Increasing the financial leverage by adding debt results in a decrease in the firm's value. b. What would be the price of Rivoli's stock? Do not round intermediate calculations. Round your answer to the nearest cent. per share c. What happens to the firm's earnings per share after the recapitalization? Do not round intermedate calculations. Round your answer to the nearest cent The firm -Selectits EPS by$ d. The $500,000 EBIT given previously is actually the expected value from the following probability distribution: Probability 0.10 0.20 0.40 0.20 0.10 EBIT ($ 95,000) 200,000 350,000 950,000 1,395,000 Determine the times-interest-earned ratio for each probability. Use a minus sign to enter negative values, fany. Do not round intermediate calculations. Round your answens to two decimal places Probability 0.10 0.20 0.40 0.20 0.10 TIL what is the probability of not covering the interest payment at the 35% debt level? Do not round intermediate calculations. Round your answer to two decimal places