1.- Macbeth Spot Removers is entirely equity financed with values as shown below: Data Number of shares 3,000 Price per share $ 30 Market value of shares $ 90,000 Although it expects to have an income of $3,500 a year in perpetuity, this income is not certain. This table shows the return to stockholders under different assumptions about operating income. We assume no taxes. Outcomes Operating income ($) 2,500 3,000 3,500 4,000 Suppose that Macbeth Spot Removers issues only $9,600 of debt and uses the proceeds to repurchase 320 shares. The interest rate on the debt is 8%.

a. Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption. (Input all values as a positive number. Round your "Earnings per share" answers to 2 decimal places. Enter your "Return on shares" answers as a percent rounded to 2 decimal places. Round the other answers to the nearest whole number.)

b. If the beta of Macbeth's assets is 0.80 and its debt is risk-free, what would be the beta of the equity after the debt issue? (Round your answers to 2 decimal places.)