Global Pistons (GP) has common stock with a market value of $470 million and debt with...

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Global Pistons (GP) has common stock with a market value of $470million and debt with a value
of $299 million. Investors expect a 15% return on the stock anda 5% return on the debt. Assume perfect capital markets.
a. Suppose GP issues $299 million of new stock to buy back thedebt. What is the expected return of the stock after thistransaction?
b. Suppose instead GP issues $71 million of new debt torepurchase stock.
i. If the risk of the debt does not change, what is the expectedreturn of the stock after this transaction?

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Global Pistons (GP) has common stock with a market value of $470million and debt with a valueof $299 million. Investors expect a 15% return on the stock anda 5% return on the debt. Assume perfect capital markets.a. Suppose GP issues $299 million of new stock to buy back thedebt. What is the expected return of the stock after thistransaction?b. Suppose instead GP issues $71 million of new debt torepurchase stock.i. If the risk of the debt does not change, what is the expectedreturn of the stock after this transaction?