Yerba Industries is an$$ all$-$equity firm whose stock has a beta of $0\mathrm{.}90$ and an expected return of $9\mathrm{.}5\%.$ Suppose it issues new$$ risk$-$free debt with a $3\%$ yield and repurchase $5\%$ 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.

Question content area bottom

Part $1$

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

The beta of Yerba stock after this transaction is

$$

$0\mathrm{.}95.($Round to two decimal$$ places.$)$

Part $2$

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

The expected return of Yerba stock after this transaction is

$$

$9\mathrm{.}86\%.($Round to two decimal$$ places.$)$

Part $3$

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$$ shareholder? Explain.$$

If prior to the$$ transaction, Yerba expected earnings per share this coming year of $ $2\mathrm{.}00,$ with a forward$$ P$/$E ratio of $13,$Yerba$\text{'}$s expected earnings per share after this transaction is $$$

$$

enter your response here. $($Round to the nearest$$ cent.$)$ Please show me how to solve in Excel.