The purpose of this assignment is todemonstrate to students how the issuance of debt to purchase outstandingcommon stock could affect the value of the company’s equity andredefine the capital structure. The problem will also allow students toexplore the effect of corporate taxes through debt financing. Assignment Steps Resources: Corporate FinanceScenario: Hightower, Inc. plans to announce it willissue $2.0 million of perpetual debt and use the proceeds to repurchasecommon stock. The bonds will sell at par with a coupon rate of 5%.Hightower, Inc. is currently an all-equity company worth $7.5 millionwith 400,000 shares of common stock outstanding. After the sale of thebonds, the company will maintain the new capital structure indefinitely.The company currently generates annual pretax earnings of $1.5 million.This level of earnings is expected to remain constant in perpetuity.The tax rate is 35%. Prepare a memo advising the management of Hightower, Inc. on the financial impact, including the following: Construct the company’s market value balance sheet before theannouncement of the debt issue. What is the price per share of thefirm’s equity?Construct the company’s market value balance sheet immediately after the announcement of the debt issue.Show all calculations and submit with your memo. Format your paper consistent with APA guidelines.