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Global Pistons (GP) has common stock with a market value of $200 million and debt with a value of $100 million. Investors expect a 15%
Global Pistons (GP) has common stock with a market value of $200 million and debt with a value of $100 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets. a. Suppose GP issues $100 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? Question 11 1 pts b. Suppose instead GP issues $50 million of new debt to repurchase stock. b1. If the risk of the debt does not change, what is the expected return of the stock after this transaction
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