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. Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? If Delta Technology stock currently trades for $11.25 per share, an example of an arbitrage opportunity that exists today which requires no future cash flow obligations would be: Sell----million shares of-----at the current price of $------and buy-----million shares of---at the current price of $---and borrow $---million.(Round to two decimal places.
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. Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity?
If Delta Technology stock currently trades for $11.25 per share, an example of an arbitrage opportunity that exists today which requires no future cash flow obligations would be:
Sell----million shares of-----at the current price of $------and buy-----million shares of---at the current price of $---and borrow $---million.(Round to two decimal places.
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