Jeff Bezos, from Amazon, has just hired his first Carleton University finance student. During a meeting, he decides to test his new hire and provides her with the following information: Amazon is planning a major restructuring over the next 6 months. Its current debt ratio to capital is 15%, and its beta is .95. The firm currently has a AA rating, and a default spread of 1.0% over T-Bond rates, based on their AA rating. Amazon's optimal debt ratio is 35%, but if they go to their optimal debt ratio, their rating drops to A and the spread increases to 1.50%. The market value of equity for Amazon is 100 billion, and there are 250 million shares outstanding. The current treasury bond rate is 4%, the market risk premium is 6.0% and the firm's current tax rate is 40%. Estimate the change in Amazon's firm value a] and the change in its stock price b], if Amazon moves to its optimal debt ratio by borrowing money to buy back stock, assuming that Amazon's firm value is estimated to grow by 3% a year forever and that its investors are rational. Question 24 (3 points) A] Change in Firm Value =Question 25 (1 point) B] Change in Stock Price = Paragraph V BIUVA . . . Lato (Recom... v 19px ... v C