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1. ABC Co. has the following financial data. Yield to maturity(r d ) = 9%, Coupon rate(r c ) = 7%, Tax= 0, r f

1. ABC Co. has the following financial data.

Yield to maturity(r_d) = 9%, Coupon rate(r_c) = 7%, Tax= 0, r_f = 6%, E(r_m) = 12%, _U =1.5, Stock Price = $15, Number of shares outstanding = 50m.

Balance Sheet(B/S)

Assets $1000m Debt(10yr, 7% coupon rate) $500m

Equity $500m

What is _D, _L, r_e?
If the company raises $150m by issuing stock how and why r_e changes? (Assume that r_d is unchanged)

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