Suppose BetaBeta Industries and DeltaDelta Technology have identical assets that generate identical cash flows. BetaBeta Industries is an all-equity firm, with 9 million shares outstanding that trade for a price of $19.00 per share. DeltaDelta Technology has 16 million shares outstanding, as well as debt of $51.30 million.

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

According to MM Proposition I, the stock price per share for Delta Technology is $............... (Round to the nearest cent.)

b. Suppose Delta Technology stock currently trades for $10.03 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity?

If Delta Technology stock currently trades for $10.03 per share, an example of an arbitrage opportunity that exists today which requires no future cash flow obligations would be:(Select from the drop-down menus and round to two decimal places.

Sell (16 - 6) million shares of (deta - belta) at the current price of ..........$ and buy (9 - 16) million shares of (beta - delta) at the current price of $.............and borrow $.............million.

The assumptions necessary to exploit this opportunity are: (Select the best choice below.)

A.Trading can be done at current prices.

B.No taxes or transactions costs.

C.You can borrow at the same terms as the leveraged firm.

D.All of the above.