Global Pistons? (GP) has common stock with a market value of $ 400 million and debt...

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Global Pistons? (GP) has common stock with a market value of $400 million and debt with a value of $ 206 million. Investorsexpect a 14 % return on the stock and a 8 % return on the debt.Assume perfect capital markets. a. Suppose GP issues $ 206 millionof new stock to buy back the debt. What is the expected return ofthe stock after this? transaction? b. Suppose instead GP issues $89.88 million of new debt to repurchase stock. i. If the risk ofthe debt does not? change, what is the expected return of the stockafter this? transaction? ii. If the risk of the debt? increases,would the expected return of the stock be higher or lower than whendebt is issued to repurchase stock in part ?(i?)?

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Global Pistons? (GP) has common stock with a market value of $400 million and debt with a value of $ 206 million. Investorsexpect a 14 % return on the stock and a 8 % return on the debt.Assume perfect capital markets. a. Suppose GP issues $ 206 millionof new stock to buy back the debt. What is the expected return ofthe stock after this? transaction? b. Suppose instead GP issues $89.88 million of new debt to repurchase stock. i. If the risk ofthe debt does not? change, what is the expected return of the stockafter this? transaction? ii. If the risk of the debt? increases,would the expected return of the stock be higher or lower than whendebt is issued to repurchase stock in part ?(i?)?