Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 12 million shares outstanding that trade for a price of $16.00 per share. Delta Technology has 21 million shares outstanding, as well as debt of $57.60 million.

a. According to MM Proposition I, what is the stock price for DeltaTechnology?

b. Suppose Delta Technology stock currently trades for $9.68 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity?Question content area bottom Part 1