Capital Structure and Stock Split
Please provide these answers in Excel so that I can figure out the steps.
1.Ethier enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.3% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk?
2. Suppose you own 2000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $80 per share. Laurence announces a 2-for-1 stock split. Immediately after the split, how many shares will you have, what will the adjusted EPS and DPS be, and what would you expect the stock price to be?
The solution explains two questions - one relating to change in risk due to change in capital structure and the second one relating to stock split
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- ethier enterprises.xls