Spam Corp. is financed entirely by common stock and has a beta of 1.25. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.00 and a cost of equity of 14.29%. The companys stock is selling for $42. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with a 5.5% interest rate. The company is exempt from corporate income taxes. Assume MM are correct.

a.	Calculate the cost of equity after the refinancing. (Round your answer to 2 decimal places.)

Cost of equity

e.	Calculate the stocks beta after the refinancing. (Round your answer to 1 decimal place.)

Stock's beta

%