(35 points total) Dab Ynapmoc (D&Y) is an all-equity perpetual company with 10 millionshares outstanding trading at the current P/E ratio of 5. Its assets have just produced EBITper share of $20 and it pays all of its earnings as dividends. Its effective tax rate is equal to40%. D&Y has only assets-in-place and, thus, does not grow.(1) (2 points) What is D&Y’s cost of capital (i.e. rA) and what is its price per share P0?(2) D&Y is considering issuing $100 million in perpetual debt at a cost of rD= 5% tobuy back some equity. If D&Y decides to do the buy-back:(i) (1 point) What is the value of the levered firm?(ii) (1 point) What is the value of equity after the recapitalization?(iii) (2 points) What is the price at which equity is repurchased?(iv) (2 points) How many shares have to be repurchased?(v) (2 points) What is the equity return of the recapitalized (levered) company?(vi) (1 point) What is D&Y’s WACC?1(3) D&Y has decided not to go with the recapitalization (i.e. it is still all-equity firm).Instead, D&Y has a new investment opportunity: It can reinvest $10 per share for 5 yearsout of its earnings into developing a new drug. After 5 years the drug will be developed.The return on the project is 40% (r∗= 40%) and each $1 of investment pays forever. Thefirst investment will be made 1 year from now and the last one will be made in year 5.(a) (7 points) What is the D&Y’s price per share with the project?(b) (2 points) What is D&Y’s PVGO per share with this project?2(c) (8 points) D&Y now decides to finance its project with debt instead of earnings.Specifically, it is going to issue $100M one-period debt ($10 per share, cost ) in year 1, use itto make the investment, and then repay the principal plus interest in year 2. Then, D&Y willrepeat the same procedure in years 2 to 5 (i.e. it will issue $100M in debt in year 2, invest,and repay it in year 3, then do it again etc.) Overall, D&Y will have to make 5 interestpayments. Use APV to calculate the new price per share with this financing. D&Y’s cost ofdebt remains at 5%.3(d) (7 points) After some deliberation, D&Y decides on a different debt contract. It willborrow the PV(All Investment) at 5%, use it to finance all five investments, and will repayit as a perpetual bond. Use APV to calculate the new price per share with this