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Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all-equity firm, has 9,300 shares of stock outstanding, currently worth $23 per share. Beta Corporation uses leverage in its capital structure. The market value of Betas debt is $54,000, and its cost of debt is 14 percent. Each firm is expected to have earnings before interest of $51,000 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 14 percent per year.

Requirement 1:

What is the value of Alpha Corporation? (Do not include the dollar sign ($).)

Value of Alpha

$

Requirement 2:

What is the value of Beta Corporation? (Do not include the dollar sign ($).)

Value of Beta

$

Requirement 3:

What is the market value of Beta Corporations equity? (Do not include the dollar sign ($).)

Value of Betas equity

$

Requirement 4:

How much will it cost to purchase 24 percent of each firms equity? (Do not include the dollar signs ($).)

Cost for Alpha	$
Cost for Beta	$

Requirement 5:

Assuming each firm meets its earnings estimates, what will be the dollar return to each position in requirement 4 over the next year? (Do not include the dollar signs ($). Round your answers to the nearest whole dollar amount. (e.g., 32))

Return on Alpha	$
Return on Beta	$

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