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You are given the following information for a company: EBIT = $4,500,000 30- year maturity, 3,000 semiannual coupon bonds with a coupon rate of 10% and a current market value of $1000 per bond

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You are given the following information for a company:

• EBIT = $4,500,000
• 30- year maturity, 3,000 semiannual coupon bonds with a coupon rate of 10% and a current market value of $1000 per bond.
• 20-year maturity, 2,000 annual coupon bonds with a coupon rate of 8%, traded at 100% of par value.
• Tax rate = 0.21
• Cost of unlevered equity RU= 20%

Corporate bond par value of $1,000 per bond, regardless of maturity

a) What is the value of the company's levered equity?

b) What is the cost of levered equity (RE)?

c) What is the firm's WACC?

d) Assuming that there is no cost of financial distress. If the firm wants to decrease the cost of levered equity RE to 20%, by how much should it increase or decrease debt? What is the new WACC?