Sunrise Industries Corp. is planning to repurchase part of its common stock in the open market by issuing corporate debt. As a result, the debt-to-equity ratio is expected to rise from 40 percent to 50 percent. The annual interest payment on its outstanding debt amounts to \($0.75\) million with an interest rate at 10 percent. The expected earnings before interest are \($3.75\) million. There are no taxes in the country where Sunrise operates.

(Treat the debt and earnings as perpetuities to simplify calculation.)

a. What is the total value of Sunrise Industries Corp.?

b. What is the expected return on equity before and after the announcement of the stock repurchase plan?

c. How would the stock price change at the announcement of the repurchase?