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Question 4. Waltman Electronics plans to announce that it will issue $1.9M of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a coupon rate of 5%. The company is currently all-equity and worth $6.7M with 290000 shares of common stock outstanding. After the sale of the bond, the company will maintain the new capital structure indefinitely. The annual pretax earnings of $1.32M are expected to remain constant in perpetuity. The tax rate is 21%. [Total: 18 marks] i. What is the expected return on the company's equity before the announcement of the debt issue? [2 marks] ii. Construct the company's market value balance sheet before the announcement of the debt issue. What is the price per share of the firm's equity? [ 3 marks] iii. Construct the company's market value balance sheet immediately after the announcement of the debt issue. [4 marks] iv. What is the company's stock price per share immediately after the repurchase announcement? [1 mark] v. How many shares will the company repurchase as a result of the debt issue? How many shares of common stock will remain after the repurchase? [2 marks] vi. Construct the market value balance sheet after the restructuring. [4 marks] vii. What is the required return on the company's equity after the restructuring? [2 marks]