Work out the following:

You would purchase 3.3% of the LD equity and sell (issue) 0.3% of the equivalent of the LD debt. The equity would cost you e . $50 = $1.65; the debt issue would give you $0.15 in proceeds. Your net cost would thus be $1.50—as it should be, because purchasing 5% of the MD equity would have cost you 5% of $30, which also comes to $1.50.

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Bad Luck: Good Luck: d. $55 d $55 + e. $5 +e. $105 = = $0.5% $66.5% - ($105 $5) e = ($66 $0) 5% - d == -0.003 e = +0.033