Task #$4($Capital structure: Modigliani$-$Miller I$)$ Suppose Alpha Industries and

Omega Technology have identical assets that generate identical cash flows. Alpha Industries

is an all$-$equity firm, with $10$ million shares outstanding that trade for a price of $$22$ per share.

Omega Technology has $20$ million shares outstanding as well as debt of $$60$ million.

a$)$ According to MM Proposition I, what is the stock price for Omega Technology?

b$)$ Suppose Omega Technology stock currently trades for $$11$ per share. What arbitrage

opportunity is available? What assumptions are necessary to exploit this opportunity?