Eagle Corp.has as many as ten million shares in circulation and a debt burden of 100mn. The current share price stands at 75 and the cost of equity stands at 8.50%.Eagle Corp.suddenly announces to issue 350mn of new debt, e.g. through a new bond offering.

The proceeds will primarily be used to repay old debt. Any remaining funds will be paid out to shareholders by means of a special dividend. (Assume a perfect capital market!)

1.)Determine Eagle Corp.'s share price after the debt offering has been announced (but not yet been completed)!

2.) Determine Eagle Corp.'s share price after the debt offering has been completed!

3.)Assume that the old debt was considered to be risk-free at a yield of 4.25%. The new debt is considered to be risky, however, at an expected yield of 5.00%. Determine Eagle Corp.'s cost of equity after the new debt offering has been completed!