Psychology homework help. Spam corporation is financed by common stock holders and has a beta of 1.0 the firm is expected to generate a level perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 8 and a cost of equity of 12.5% the company’s stock is selling for $50 dollars. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk free, with 5% interest rate. The company is exempt from corporate income taxes. Assuming MM theory is correct calculate the following items ?A. The cost of equityB.Overall cost of capital (WACC)C.Price/Earning ratioD.Stock Price E.Stock Beta
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