What is the beta for the firm after this change in capital structure?

Consider a firm that currently has no debt. The risk free rate is 3% the market risk premium is Show more Consider a firm that currently has no debt. The risk free rate is 3% the market risk premium is 6% and the firm carries a beta of 2. Assume no taxes or transaction costs and perfect capital markets (i.e. Modigliani-Miller). a) What is the weighted average cost of capital for this firm? WACC = .15 b) If the firm currently has a valuation of $10 million what is the market value of debt and equity if the firm issues 1-year zero coupon riskless debt with face value of $4.12 million and uses the proceeds to repurchase stock? Debt: $4M Equity: $6M c) What is the beta for the firm after this change in capital structure? = 3.33 d) Assume that the firms debt issue raises only $3.9 million. What is the cost of debt and cost of equity? Is the firms debt risky? PLEASE ANSWER PART D THE ANSWERS FOR A) B) AND C) ARE PROVIDED AND MAY BE NEED OR THEY MAY NOT BE (NOT SURE) PLEASE ANSWER STEP BY STEP Show less

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