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Capital Structure and Stock Split

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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?

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Solution Summary

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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