Your company is an all-equity firm with 300,000 shares outstanding. The company's EBIT Is $2,500,000, and EBIT Is expected to remain constant over time. The company pays out all Itr earnings each year, so Its earnings per share equal Its dividends per share. The corporate Income tax rate is 40%. The risk-free rate in the economy s 2%, and the market risk premium is 5%. The company's beta is currently 1.00. The company is considering Issulng $6. proceeds for a stock repurchase. If Issued, the bonds would have an estimated yleld to maturity of2 percent (and that would be the annual coupon rate as well). 5 million worth of perpetual bonds (at par) and using the The usual timeline will be followed: (1) the announcement is made that the firm will recapitalize, (2) the market price of the stock changes in anticipation of the recapitalization, (3) the debt Is issued, and (4) the shares are immediately repurchased at the anticlpated price. What is the new equity beta after the entire transaction is complete? 1.266 1.222 1.202 O 1.182 1.244 s pe Assume that Flrm A Is an all-equlty firm with total assets of $5,000 and the following distribution of EBIT for the coming year Firm A 3000% $500.00 $0.00 $500.00 $200.00 $300.00 10.00% 6.00% 6.00% 50 00% 800.00 $0.00 o$900.00 $380.00 $540.00 18.00% 10.80% EBIT $700.00 0.00 $700.00 $280.00 $420.00 14.00% 8.40% EBT Taxes (40%) Net Income ROA ROE Now assume that the firm plans to issue $2,000 of debt, at an interest rate of 6.4 percent, and use the proceeds to repurchase equity (you may ignore potential impacts on price and assume that the firm will then have $3,000 of equity). Given this information, determine the coefficient of varlation of the new ROE distribution. 0.3068 O 0.2849 0.2922 0.2995 O 0.3141