Q1. Executive Cheese has issued debt with a market value of $100.56 million and has outstanding 15.60 million shares with a market price of $10 a share. It now announces that it intends to issue a further $55.44 million of debt and to use the proceeds to buy back common stock. Debtholders, seeing the extra risk, mark the value of the existing debt down to $60 million.Please show all working.

a.Calculate the market price of the stock following the announcement.(Round your answer to 2 decimal places.)

Price of the stock =$

b.How many shares can the company buy back with the $55.44 million of new debt that it issues?(Enter your answer in millions. Round your answer to 1 decimal place.)

Number ofshares=million

c.What is the market value of the firm (equity plus debt) after the change in capital structure?(Enter your answer in millions. Round your answer to 2 decimal places.)

Market value =$million

d.What is the debt ratio after the change in structure?(Round your answer to 2 decimal places.)

Debt ratio=

Q2.Omega Corporation has 10.4 million shares outstanding, now trading at $59 per share. The firm has estimated the expected rate of return to shareholders at about 11%. It has also issued $220 million of long-term bonds at an interest rate of 6%. It pays tax at a marginal rate of 35%. Please show all working.

a.What is Omega's after-tax WACC?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

After-tax WACC =%

b.What would WACC be if Omega used no debt at all? (Hint:For this problem you can assume that the firm's overall beta [_A] is not affected by its capital structure or by the taxes saved because debt interest is tax-deductible.)(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC =%