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Please show work. I figured out some but now all of the problem. Macbeth Spot Removers is entirely equity financed. Use the following information. Number
Please show work. I figured out some but now all of the problem.
Macbeth Spot Removers is entirely equity financed. Use the following information. Number of shares Price per share Market value of shares Expected operating income Return on assets 2,500 $100,000 $16,000 Macbeth now decides to issue $50,000 ot debt and to use the proceeds to repurchase stock. Suppose that Ms. Macbeth's investment bankers have informed her that since the new issue of debt is risky, debtholders will demand a return ot 11%, which IS 3% above the risk-free interest rate. a. What are r. and rs atter the debt issue? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Return on assets Return on equity 15 b. Suppose that the beta ot the unlevered stock was _60_ What will A, BE, and D be atter the change to the capital structure? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Asset beta Debt beta Equity beta .60
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