Flood Motors is an all-equity firm (Debt ratio = 0%) with 200,000 shares outstanding, with current information data: WACC 10% EPS $2.34 The risk-free rate 6 % Market Risk Premium 4 % Tax rate is 40 % . The company is considering issuing $2 million worth of bonds (at par) and using the proceeds for a stock repurchase. This will create a debt ratio of 25% in the company. if it proceeds with the recapitalization and issued bonds, the bonds would have an estimated yield to maturity (rd) of 8.0%, and EPS is expected to raise to $3.45 and companys beta would rise to 1.2 . 1- Before the recapitalization, what is the companys cost of common equity (rs)? * 0% 14% 6% 10% None of the above 2- Before the recapitalization, what is the companys stock beta (Bu)? * 2.00 1.20 1.00 2.34 None of the above 3- Before the recapitalization, what is the companys stock price (P0)? * $23.4 $20.0 $39.6 $54.3 None of the above 4- After the recapitalization, what is the companys cost of common equity (rs)? * 10.8% 11.2% 10% 8% None of the above 5- After the recapitalization, what is the companys WACC? * 11.2% 9.3% 8.0% 10% None of the above 6- After the recapitalization, what is the companys stock price (P0)? * $52.64 $45.49 $31.94 $23.46 None of the above 7- If the company used a debt for 50% with 9% YTM (before tax cost of debt), then the new WACC compared to initial WACC with no debt will: * Increase by 1% Increase by 50% Decrease by 0.5% Decrease by 1.5% None of the above 8- If the company has a target WACC of 9%, knowing that it can issue bonds at rate of 8% and maintain Beta leverage 1.15, how much approximately it should use debt as portion of its total capital to meet its target? * 15% 28% 34% 55% None of the above