Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 13 million shares outstanding that trade for a price of $19.00 per share. Delta Technology has 23 million shares outstanding, as well as debt of $74.10 million. According to MM Proposition I, what is the stock price for Delta Technology? (Round to the nearestcent.) Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? (Round to the nearestcent.)
Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 13 million shares outstanding that trade for a price of $19.00 per share. Delta Technology has 23 million shares outstanding, as well as debt of $74.10 million. According to MM Proposition I, what is the stock price for Delta Technology? (Round to the nearestcent.) Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? (Round to the nearestcent.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 13 million shares outstanding that trade for a price of $19.00 per share. Delta Technology has 23 million shares outstanding, as well as debt of $74.10 million.
- According to MM Proposition I, what is the stock price for Delta Technology? (Round to the nearestcent.)
- Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? (Round to the nearestcent.)
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