You have been asked by JJ Corporation, a California based firm that manufactures and services digital satellite TV systems to evaluate its capital structure. They currently have $70$ million shares outstanding at $$10$ per share. In addition, the company has $500,000$ bonds with a coupon rate of $8\%,$ trading at $$1000$ per bond. JJ is rated BBB and the interest rate on the bond is $8\%.$ The beta of the company is $1\mathrm{.}2,$ the current risk$-$free rate is $6\%.$ The tax rate is $40\%.$

$1)$ What is the firm$$s current debt$/$equity ratio?

$2)$ What is the firm$$s current weighted average cost of capital?

JJ Corporation is proposing to borrow $$250$ million and use it to buyback $$100$ million worth of stock. The effect of this borrowing will be a drop in bond rating to B$,$ which currently carries an interest rate of $11\%$

$3)$ What is the firm$$s cost of equity after the borrowing?

$4)$ What is the new WACC after this additional borrowing?

$5)$ Would you advice the company to go forward with this proposal?