The required return on the debt (Enter your answer as a percent rounded to 1 decimal place.) e. The required return on the company (i.e., stock and debt combined) after the refinancing (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Astromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 11.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following:
a-c Has been answered. Need the following answered, in Excel if possible.
d. The required return on the debt (Enter your answer as a percent rounded to 1 decimal place.)
e. The required return on the company (i.e., stock and debt combined) after the refinancing (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
| a. | Beta of the common stock | 2.6selected answer correct | |
| b. | Required return (before refinancing) | 11.4selected answer correct | % |
| Risk premium (before refinancing) | 6.6selected answer correct | % | |
| c. | Required return (after refinancing) | 18.0selected answer correct | % |
| Risk premium (after refinancing) | 13.2selected answer correct | % |
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