Hello, I would like to check the solution for the following exercise, particularly question C. Thanks a lot.

Silver Lake Mining is a gold mining firm that has 100 million shares outstanding, trading at $ 20 a share. The firm has $ 500 million in debt outstanding. The firm currently has a beta of 1.20 and a pre-tax cost of borrowing of 8%. The firm is considering borrowing $ 500 million and buying back stock. If it does, its rating will deteriorate and it will have to pay 9% on its borrowing. Assuming a 40% tax rate, a 7% riskless rate and a 5.5% risk premium:

a. Estimate the cost of capital for Silver Lake Mining before it borrows the additional $ 500 million.

b. Estimate the cost of capital for Silver Lake Mining if it borrows the additional $ 500 million and buys back stock.

c. Estimate the change in value per share from the action, assuming that investors are rational and that cashflows will grow 5% a year in perpetuity.