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Additional Information for All Question: Return on market is10%, return on T-bills is 4%, and companies pay 40% corporate taxand 30% capital gains tax.Greenleaf Inc. is a newly incorporated firm that requires $500million in capital; and is raising capital through debt and equityonly. The firm is comparing one of two options on capitalraising.Option A: The firm raises $200million through issuing bonds and$300 million through issuing 600,000 (0.6million) ordinary shares.Each bond offers a semi annual coupons of $26.0485, has a par valueof $200, matures in 10 years, and offers a YTM of 10% to itsinvestors. The firm is to offer an expected dividend of $0 at theend of the first year, and offers ordinary shareholders a return of14.92% per year.Option B: The firm raises a total of $500 million by issuing 1million bonds and 500,000 (0.5million) ordinary shares. Each bondcosts $250, offers semiannual coupons, has a par value of $200,matures in 10 years, and offer a YTM of 11% to its investors. Eachordinary share costs $500.Q2. (a) All things being equal, does cost of debt or cost ofequity cost more?(b) When a firm increases itsDebt/Equity ratio, how does its cost of debt, cost of equity andits beta change?(C) Analyze options A and B Which of options A and B should bechosen by Greenleaf Inc.?