HOW TO DO (i),(ii),(iii) ? ANSWER ALL PARTS OF THIS QUESTION a....
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HOW TO DO (i),(ii),(iii) ? 
ANSWER ALL PARTS OF THIS QUESTION a. An all-equity company ABC has nine million outstanding shares, with a share price currently at 55. The company also has outstanding debt valued at 75 million. Equity cost of capital is 6.5%. The company has made an announcement of issuing new debt valued at 210 million. The proceeds of this issue will be used to repay outstanding debt and to pay out an immediate dividend. Assume capital markets are perfect. Required: w i. What is the share price just after the announcement, before the issue takes place? [2 marks] ii. Based on the market-value balance sheet, calculate the price of the share when the announced transaction is carried out. (5 marks] iii. Assume that the existing outstanding debt bears no risk and has an expected return of 4.75%. Also assume that the new debt bears risk and has an expected return of 6%. Calculate the equity cost of capital after the announced transaction is carried out. [5 marks]
HOW TO DO (i),(ii),(iii) ?
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