Question

Spam Corp. is financed entirely by common stock and has a beta of 1.63. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.80 and a cost of equityo112. 2 The company s sto s selling for$32.Now the irm decides ep ro ase half of its shares and substitute an equal value of b The debts sk e with an interest r te f % me ompany is exempt from corporate income taxes. Assume MM are correct. a. Calculate the cost of equity after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.) Cost of equity b. Calculate the overall cost of capital (WACC) after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.) Cost of capital c. Calculate the price-earnings ratio after the refinancing. (Round your answer to 2 decimal places.) d. Calculate the stock price after the refinancing. (Round your answer to the nearest whole number.) Stock price e. Calculate the stock's beta after the refinancing. (Round your answer to 1 decimal place.) Stock's beta

Answer 1

old E Stock PrEtio 32/Aso : 4、0 (&o) 12.82、

こ 32.01 2es-.esenn-or)