Problem 14-21
	Yerba Industries is an all-equity firm whose stock has a beta of 1.2 and an expected return of 12.5%. Suppose it issues new risk-free debt with a 5% yield and repurchases 40% of its stock. Assume perfect capital markets.
	a.	What is the beta of Yerba stock after this transaction?
	b.	What is the expected return of Yerba stock after this transaction?
	Suppose that prior to this transaction, Yerba expected earnings per share this coming year of $1.50, with a forward P/E ratio (that is, the share price divided by the expected earnings for the coming year) of 14.
	c.	What is Yerbas expected earnings per share after this transaction? Does this change benefit shareholders? Explain.
	d.	What is Yerbas forward P/E ratio after this transaction? Does the P/E ratio go up or down?
		Unlevered beta	1.20
		Expected return	12.50%
		Risk-free rate	5.00%
		New debt level	40.00%
		New Debt/Equity
		Market risk premium
	a.	What is the beta of Yerba stock after this transaction?
		New beta
	b.	What is the expected return of Yerba stock after this transaction?
		New expected return on equity
	Suppose that prior to this transaction, Yerba expected earnings per share this coming year of $1.50, with a forward P/E ratio (that is, the share price divided by the expected earnings for the coming year) of 14.
	c.	What is Yerbas expected earnings per share after this transaction? Does this change benefit shareholders? Explain.
		Old EPS	$1.50
		Forward P/E	14
		Assumed shares	100
		Price per share
		Old equity
		New debt
		New earnings
		New equity
		New shares
		New EPS
	d.	What is Yerbas forward P/E ratio after this transaction? Does the P/E ratio go up or down?
		New P/E
		Price/Earnings ratio
Requirements
	1.	In cell D16, by using cell references, calculate the new debt/equity ratio (1 pt.).
	2.	In cell D17, by using cell references, calculate the market risk premium (1 pt.).
	3.	In cell D21, by using cell references, calculate the new beta (1 pt.).
	4.	In cell D25, by using cell references, calculate the new expected return on equity (1 pt.).
	5.	In cell D34, by using cell references, calculate the price per share (1 pt.).
	6.	In cell D35, by using cell references, calculate the old equity (1 pt.).
	7.	In cell D36, by using cell references, calculate the new debt (1 pt.).
	8.	In cell D37, by using cell references, calculate the new earnings (1 pt.).
	9.	In cell D38, by using cell references, calculate the new equity (1 pt.).
	10.	In cell D39, by using cell references, calculate the new number of shares (1 pt.).
	11.	In cell D40, by using cell references, calculate the new earnings per share (1 pt.).
	12.	In cell D44, by using cell references, calculate the new price/earnings ratio (1 pt.).
	13.	To answer whether the price/earnings ratio rises or falls, you need to compare the new price/earnings ratio to the forward price/earnings ratio. In cell D45, type either Falls, Stays the same, or Rises (1 pt.).