Suppose Sigma Industries and Pi Technology have identical assets that generate identical cash flows. Sigma Industries is an all-equity firm, with 12 million shares outstanding that trade for a price of $23.00 per share. Pi Technology has 21 million shares outstanding, as well as debt of $82.80 million. a. According to MM Proposition I, what is the stock price for Pi Technology? b. Suppose Pi Technology stock currently trades for $14.98 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? a. According to MM Proposition I, what is the stock price for Pi Technology? According to MM Proposition I, the stock price per share for Pi Technology is $ (Round to the nearest cent.) b. Suppose Pi Technology stock currently trades for $14.98 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? If Pi Technology stock currently trades for $14.98 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. at the current Sell 7 million shares of at the current price of s and buy million shares of price of s and borrow $ million. The assumptions necessary to exploit this opportunity are: (Select the best choice below.) O A. Trading can be done at current prices. OB. You can borrow at the same terms as the leveraged firm, O C. No taxes or transactions costs. OD. All of the above. Suppose Sigma Industries and Pi Technology have identical assets that generate identical cash flows. Sigma Industries is an all-equity firm, with 12 million shares outstanding that trade for a price of $23.00 per share. Pi Technology has 21 million shares outstanding, as well as debt of $82.80 million. a. According to MM Proposition I, what is the stock price for Pi Technology? b. Suppose Pi Technology stock currently trades for $14.98 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? a. According to MM Proposition I, what is the stock price for Pi Technology? According to MM Proposition I, the stock price per share for Pi Technology is $ (Round to the nearest cent.) b. Suppose Pi Technology stock currently trades for $14.98 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? If Pi Technology stock currently trades for $14.98 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. at the current Sell 7 million shares of at the current price of s and buy million shares of price of s and borrow $ million. The assumptions necessary to exploit this opportunity are: (Select the best choice below.) O A. Trading can be done at current prices. OB. You can borrow at the same terms as the leveraged firm, O C. No taxes or transactions costs. OD. All of the above
