3) The price per share of your all-equity firm is $30, and there are 2M shares outstanding. Suppose that your firm issues $20M worth of debt. The debt has a face value of $20M, a coupon rate of 5 percent per year, and 15 years until maturity. The expected return on this debt is 5 percent. Assume a tax rate of 40 percent. What is the new price per share after issuing this debt?

4) You are an entrepreneur who would like to start a new firm that specializes in electric cars. Your plan is to fund this new business by selling 40 percent of the equity ownership in this firm. In order to correctly price this equity, you will need to calculate the value of your business. This will involve determining the proper discount rate for electric car cash flows. Fortunately, there is one publicly traded electric car company (symbol: BOLT) you can use for comparison.

You run a regression of BOLT excess stock returns on excess market returns and obtain an equity beta of 2.5 for BOLT. Additional research informs you that the market capitalization (i.e. market value of equity) of BOLT is $600M, the value of BOLT debt is $400M (which was issued at par and will remain a $400M in perpetuity), and the beta of BOLT debt is zero.