1. ABC Corp. operates in a Perfect Capital Market. It has a market capitalization of $160 billion, and the market value of its outstanding debt is $40 billion. ABC Corp. has $20 billion of bonds that mature in one month. Rather than issue new bonds to refinance this debt, ABC Corp is considering issuing new shares of stock to raise the $20 billion of cash needed to pay off the maturing bonds.

1. How would this affect the equity cost of capital of ABC Corp.?
2. How would this affect the share price of ABC Corp. stock?