$2$

Executive Cheese has issued debt with a market value of $$106\mathrm{.}19$ million and has outstanding $14\mathrm{.}90$ million shares with a market price of $$10$ a share. It now announces that it intends to issue a further $$53\mathrm{.}71$ million of debt and to use the proceeds to buy back common stock. Debtholders, seeing the extra risk, mark the value of the existing debt down to $$60$ million.

$10$

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a$-1.$ Calculate the market price of the stock following the announcement.

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

a$-2.$ How is the market price of the stock affected by the announcement?

b$.$ How many shares can the company buy back with the $$53\mathrm{.}71$ million of new debt that it issues?

Note: Do not round intermediate calculations. Enter your answer in millions. Round your answer to $1$ decimal place.

c$-1.$ What is the market value of the firm $($equity plus debt$)$ after the change in capital structure?

Note: Do not round intermediate calculations. Enter your answer in millions. Round your answer to $2$ decimal places.

c$-2.$ Did the market value of the firm change?

d$.$ What is the debt ratio after the change in structure?

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

e$.$ Who $($if anyone$)$ gains or loses?

$\backslash$table$[[$a$-1.$ Market price of the stock,,$],[$a$-2.$ Effect on market price,,$],[$b$.$ Number of shares repurchased,,$],[$c$-1.$ Market value,,$],[$c$-2.$ Did the market value of the firm change?,,million$],[$d$.$ Debt ratio,,$],[$e$.$ Who $($if anyone$)$ gains or loses?,,$]]$