Global PistonsGP has common stock with a market value of $ million and debt with a value of $ million. Investors expect a return on the stock and a return on the debt. Assume perfect capital markets. a Suppose GP issues $ million of new stock to buy back the debt. What is the expected return of the stock after this transaction? b Suppose instead GP issues $ million of new debt to repurchase stock. i If the risk of the debt does not change, what is the expected return of the stock after this transaction? ii If the risk of the debt increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part i

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a 1 If GP issues 170 million of new stock to buy back the debt the expected return of the stock afte... View the full answer