The current market value of Blossom Haven is $20,500,000. The company has no debt. (Assume there is no cost of financial distress and general M&M assumptions apply)

a) If there are no taxes and the EBIT is $3 million, what is the cost of equity? What is the WACC? (3 marks)
b) What is the EBIT if the unlevered cost of equity is same as your answer from part (a) and the tax rate is 40% ? What is the WACC? Assume the current market value of Blossom Haven is still $20,500,000.