Short Armwer Question 2 (Total 10 marke) Shares outstanding. Ifs cost of equity is presently 120 per anmum. Suppose that simpson announces a mstructuring pian to bortow 5100 million at an interest rate of 7%pa. and usirig the proceedh to repurchesh shares a) If the assumptions of the MM capital structure irrelevance theory hold and the market is semi-strong form efficient, what is the share price of Simpson after this announcement is made? Why? (2. mark) b) Under the same assumption of Part a), what is the WACC of the company after the restructurinis is completed? (2 marks) c) Under the same assumption of Part a). what is the cost of equity of the company after the restructuring is completed? Discuss how the restructuring might influence the beta of equity. ( 3 marks) d) Assume that the assumptions of the MM capital structure irrelevance theory hold except for the existence of corporate taxes. Suppose that Simpson pays corporate taxes of 40% and that shareholders expects the change in debt to be permanent. Calculate the share price of Simpson Ltd after the announcement is made, 2. marks) 3) Under the same assumption of Part d). calculate the D/E ratio of Simpson Ltd immediately after the estructuring plan is completed. (1 mark) Short Armwer Question 2 (Total 10 marke) Shares outstanding. Ifs cost of equity is presently 120 per anmum. Suppose that simpson announces a mstructuring pian to bortow 5100 million at an interest rate of 7%pa. and usirig the proceedh to repurchesh shares a) If the assumptions of the MM capital structure irrelevance theory hold and the market is semi-strong form efficient, what is the share price of Simpson after this announcement is made? Why? (2. mark) b) Under the same assumption of Part a), what is the WACC of the company after the restructurinis is completed? (2 marks) c) Under the same assumption of Part a). what is the cost of equity of the company after the restructuring is completed? Discuss how the restructuring might influence the beta of equity. ( 3 marks) d) Assume that the assumptions of the MM capital structure irrelevance theory hold except for the existence of corporate taxes. Suppose that Simpson pays corporate taxes of 40% and that shareholders expects the change in debt to be permanent. Calculate the share price of Simpson Ltd after the announcement is made, 2. marks) 3) Under the same assumption of Part d). calculate the D/E ratio of Simpson Ltd immediately after the estructuring plan is completed. (1 mark)