Da Inc Is Currently An All Equity Firm With A Value Of 500 It Has 25 Shares Outs

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DA Inc. is currently an all-equity firm, with a value of $500. It has 25 shares outstanding. The EBIT is 153.85 per year forever. The tax rate is 35%. The payout is 100%. It is planning to do a capital restructuring by issuing $200 of perpetual debt, costing 10% and use the proceeds to repurchase stock.

– What is the cost of unlevered equity?

– How many shares will it repurchase? At what price?

– What is the cost of levered equity? Confirm your answer by both computing the PV of all cash flows to shareholders at levered equity cost and using MMII.