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Only need help on the last two Spam Corp. is financed entirely by common stock and has a beta of.85. The firm is expected to
Only need help on the last two
Spam Corp. is financed entirely by common stock and has a beta of.85. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.60 and a cost of equity of 13.16%. The company's stock is selling for $58. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with an interest rate of 4.5%. The company is exempt from corporate income taxes. Assume MM are correct. a. Calculate the cost of equity after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.) b. Calculate the overall cost of capital (WACC) after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.) c. Calculate the price-earnings ratio after the refinancing. (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Calculate the stock price after the refinancing. e. Calculate the stock's beta after the refinancing. (Round your answer to 1 decimal place.) a. Cost of equity b. Cost of capital c. Price-earnings ratio d. Stock price e. Stock's beta 21.82% 13.16% 4.58Step by Step Solution
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