use the following info to complete the table, Currently the company has value of $5 million with outstanding shares of 100,000. The company generates $1,538,461.5 in earnings before interest and taxes (EBIT) in perpetuity. The corporate tax rate is 35 percent and all earnings are paid as dividends. The company is considering the effect of $2 million and $2.5 million debt equity swap on its cost of capital and its value. The cost of debt is 10 percent and the cost of capital is currently 20 percent. Any investment in net working capital and capital expenditure is equal to its depreciation allowances. The corporate tax rate is 35 percent.

Table 1	Current	Debt	Debt
	Capital Structure
Book Value of Debt	$-	$2,000,000	$2,500,000
Book Value of Equity	$5,000,000	$3,000,000	$2,500,000
V=D+E	$5,000,000	$5,000,000	$5,000,000
Pretax Cost of Debt	10.00%	10.00%	10.00%
After-Tax Cost of Debt (tax rate 35%)	6.50%	6.50%	6.50%
Market Value Weights of
Debt
Equity
Cost of Equity	20.00%
Weighted-Average Cost of Capital	20.00%
EBIT	$ 1,538,461.50	$ 1,538,461.50	$ 1,538,461.50
Taxes (@ 35%)
Net Income
+ Depreciation
-change in NWC
-Capital exp.
Free Cash Flow
Value of Firm (FCF/WACC)