Global Pistons $($GP$)$ has common stock with a market value of $$470$ million and debt with a value of

$$272$ million. Investors expect a $18\%$ return on the stock and a $8\%$ return on the debt. Assume perfect

capital markets.

a$.$ Suppose GP issues $$272$ million of new stock to buy back the debt. What is the expected return of

the stock after this transaction?

b$.$ Suppose instead GP issues $$59\mathrm{.}27$ million of new debt to repurchase stock.

i$.$ If the risk of the debt does not change, what is the expected return of the stock after this transaction?

ii$.$ If the risk of the debt increases, would the expected return of the stock be higher or lower than when

debt is issued to repurchase stock in part $($i$)?$

a$.$ Suppose GP issues $$272$ million of new stock to buy back the debt. What is the expected return of

the stock after this transaction?

If GP issues $$272$ million of new stock to buy back the debt, the expected return is

$\%.($Round

to two decimal places.$)$