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Assume perfect capital markets. A farming company is an all-equity firm whose stock has a beta of 0.70 and an expected return of 18.50%. Suppose

Assume perfect capital markets. A farming company is an all-equity firm whose stock has a beta of 0.70 and an expected return of 18.50%. Suppose it issues new risk-free debt with a 6.50% yield and repurchases 5% of its stock.

A) What is the beta of its stock after this transaction?

B) What is the expected return of its stock after share repurchase?

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