1.Ms. Kraft owns 135,000 shares of the common stock of Copperhead Corporation with a market value of $19 per share, or $2,565,000 overall. The company is currently financed as follows:

Market Value

Common stock (8million shares) $475mllion

short term loans $2million

Copperhead now announces that it is replacing $1 million of short-term debt with an issue of common stock. What action can Ms. Kraft take to ensure that she is entitled to exactly the same proportion of profits as before?

What percent of the firm does Ms. Kraft currently own? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)

Complete this sentence: (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Ms. Kraft should borrow/lend___ $___and buy/sell ___that much of Copperhead stock

2.Macbeth Spot Removers is entirely equity financed. Use the following information

DATA

No. of share 2400

price per share $38

market value of share $91200

expected operating income $13680

return on asset 15%

Macbeth now decides to issue $45,600 of debt and to use the proceeds to repurchase stock. Suppose that Ms. Macbeth's investment bankers have informed her that since the new issue of debt is risky, debtholders will demand a return of 11.1%, which is 2.9% above the risk-free interest rate.

a. What are r_A and r_E after the debt issue? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b. Suppose that the beta of the unlevered stock was .60. What will _A, _E, and _D be after the change to the capital structure? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

please show all workings, thanks.