ABC Company issues additional debt instruments to finance the purchase of ordinary shares. Its total interest costs went up to P 200,000 but the earnings before income tax remains constant at P 800,000. The company’s debt capitalization rate is still at 8% and equity capitalization rate increases to 12.5%. (Ignore income tax. Note: The answer in letter a must be the same as the format in the given. If the answer is a whole number, do not include decimals. If the answer requires a decimal number, round off to the nearest hundredths.)
a. Based on the above problem compute for the total market value of the firm, and - A_____
b. The weighted average cost of capital. _______%