3. The stocks of a firm with no leverage are selling for $100 per share. The prevailing expected earnings per share is $15. Ignore tax in this question. (a) If the firm decides to repurchase half of the stock and issues an equal value of bonds with a yield of 9% instead, how will the expected earnings per share change? (b) Bobby owns 1,000 shares of the firm. Following the change in capital structure of the firm, he sells 200 shares and use the proceeds to purchase the bonds issued by the company. Calculate the change in his expected rate of return for his (aggregate) investment. A venture takes an initial investment of $100,000. In each of the next 10 years, this venture is expected to be capable of reducing the (after-tax) costs of an existing procedure by $20,000. This venture has a similar risk profile to the overall business of the company, which has a total asset value of $6 million and outstanding debt of $4 million. The cost of debt (before tax), cost of equity, and the corporate tax rate are 9%,15% and 35%, respectively. Calculate the net present value of the venture