You are the financial controller of an unlevered firm, AXE Ltd. The company has one more year on its license to operate. The license grants the company a tax-free status. The companys net cash flow is $50,000 per annum. The Board of Directors of AXE Ltd is considering two alternatives has decided to pay cash dividends. The first alternative is to issue $50,000 now and the same sum next year. The second alternative is issue $60,000 now and $38,500 next year. The additional $10,000 required to meet the payout now will be funded by a new equity issue. The company and its shareholders make a risk-free return of 15 percent on their investments. Required: (a) Calculate the value of the companys equity under each alternative. (4 marks) (b) Demonstrate that the shareholders of AXE Ltd derive the same future value of the cash dividends at the end of year 1. (4 marks) (c) In view of Miller and Modigliani (1961), comment on your answers in the above parts. (7 marks)