Yerba Industries is an$$ all$-$equity firm whose stock has a beta of $0\mathrm{.}60$ and an expected return of $14\mathrm{.}5\%.$ Suppose it issues new$$ risk$-$free debt with a $5\%$ yield and repurchases $40\%$ of its stock. Assume perfect capital markets.

a$.$ What is the beta of Yerba stock after this$$ transaction?

b$.$ What is the expected return of Yerba stock after this$$ transaction?

Suppose that prior to this$$ transaction, Yerba expected earnings per share this coming year of $$2\mathrm{.}00,$ with a forward$$ P$/$E ratio$($that is$,$ the share price divided by the expected earnings for the coming$$ year$)$ of $13.$

c$.$ What is$$ Yerba's expected earnings per share after this$$ transaction? Does this change benefit the$$ shareholder? Explain.$$

d$.$ What is$$ Yerba's forward$$ P$/$E ratio after this$$ transaction? Is this change in the$$ P$/$E ratio$$ reasonable? Explain.