What is EcoEBar’s before-tax cost of long-term debtandcost of equity?

1.What is EcoEBar’s capital structure?Listall the assumptions made underlying your calculations providing the rationale based on capital structure theories and practices.(12marks)

2.What is EcoEBar’s before-tax cost of long-term debtandcost of equity?List all the assumptions made underlyingyour calculations providing the rationale based on capital markettheories and practices.Use the Dividend Growth Model (DGM) and the Capital Asset Pricing Model (CAPM) in calculating the cost of equity.(15marks)

3.Calculate the cost of capital for EcoEBarusing weighted averagecost of capital of debt and equity, and Miller and Modigliani proposition incorporating corporate tax.Explain, which of the cost of equities calculated in question 2 (using the DGM or the CAPM) is used?Why thecapital asset pricing model is not used to estimate the firm’s cost of capital directly?(25marks)

4.If EcoEBar uses book value rather than market value to determine its capital structure, explain theimpact of the cost of capital on its capital budgeting decisions?(8marks)