Use MM propositions 1 and 2 to solve the three problems below. Your firm is financed with 100 percent equity invested by a friend who has an expected return of 20 percent on her investment. Your friend wants to reduce her investment by half, so you need to borrow to repay her. The cost of debt is 10 percent for you. 7. Calculate the cost of levered equity at the new debt/equity ratio of 1:1. 8. Calculate the WACC at the new debt/equity ratio of 1:1.