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Global Pistons​ (GP) has common stock with a market value of $ 320 million and debt...

Global Pistons​ (GP) has common stock with a market value of $ 320 million and debt with a value of $ 220 million. Investors expect a 12 % return on the stock and a 9 % return on the debt. Assume perfect capital markets.

a. Suppose GP issues $ 220 million of new stock to buy back the debt. What is the expected return of the stock after this​ transaction?

f GP issues $ 220 million of new stock to buy back the​ debt, the expected return is nothing​%.

b. Suppose instead GP issues $ 34.83 million of new debt to repurchase stock. i. If the risk of the debt does not​ change, what is the expected return of the stock after this​ transaction? ii. If the risk of the debt​ increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part ​(i​)? a. Suppose GP issues $ 220 million of new stock to buy back the debt. What is the expected return of the stock after this​ transaction?

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