Calculate the items after the refinancing

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Wonka Co. is financed entirely by common stock and has a beta of 1.2. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.46 and a cost of equity of 13.4%. The company's stock is selling for $50. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with a 5% interest rate. The company is exempt from corporate income taxes. Assuming MM are correct, calculate the following items after the refinancing: The stock's beta

Reference no: EM133121365

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