There are no taxes for the question below. In case of default, assume bankruptcy costs of 10% of the value of the assets in the defaulted state. Investors are risk-neutral and the risk free rate is 5%. - F firm value in one year is $8M, $5M, or $2M with equal probability (pre-bankruptcy costs) F has existing debt, face value $3M, zero-coupon, maturity one year - - Fraises additional debt: 2 new bonds, each with face value $2M, zero-coupon, maturity 1 year, and same seniority as existing debt. The proceeds from the issuance are immediately distributed to stockholders as a dividend. a) How much is raised in the bond issuance and paid out as a dividend? By how much does the dividend recapitalization affect: b) Firm value c) Equity value d) Shareholder wealth e) Would shareholder wealth be higher or lower if the new bonds ranked junior to the senior bonds? You can answer this question without explicit calculations