- Spam Corp. is financed entirely by common stock and has a beta of 1.30. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 8 and a cost of equity of 12.5%. The companys stock is selling for $50. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with an interest rate of 3%. The company is exempt from corporate income taxes. a. Calculate the cost of equity after the refinancing. b. Calculate the price-earnings ratio after the refinancing. c. Calculate the stocks beta after the refinancing.