Epic Record's equity has a market value of $5 million with 500,000 shares outstanding. The book value of its equity is $1,750,000.

a. What is Epic's stock price per share? What is its book value per share?

b. If the company repurchases 20 percent of its shares in the stock market, how will this affect the book value of equity if all else re- mains the same?

c. If there are no taxes or transaction costs, and investors do not change their perceptions of the firm, what should the market value of the firm be after the repurchase?

d. Instead of a share repurchase, the company decides to raise money by selling an additional 15 percent of its shares on the market. If it can issue these additional shares at the current market price, how will this affect the book value of equity if all else remains the same?

e. If there are no taxes or transaction costs, and investors do not change their perception of the firm, what should the market value of the firm be after this stock issuance?AppendixLO1