Question: Task # 4 ( Capital structure: Modigliani - Miller I ) Suppose Alpha Industries and Omega Technology have identical assets that generate identical cash flows.

Task #4(Capital structure: Modigliani-Miller I) Suppose Alpha Industries and
Omega Technology have identical assets that generate identical cash flows. Alpha Industries
is an all-equity firm, with 10 million shares outstanding that trade for a price of $22 per share.
Omega Technology has 20 million shares outstanding as well as debt of $60 million.
a) According to MM Proposition I, what is the stock price for Omega Technology?
b) Suppose Omega Technology stock currently trades for $11 per share. What arbitrage
opportunity is available? What assumptions are necessary to exploit this opportunity?
Task #4(Capital structure: Modigliani-Miller I) Suppose Alpha Industries and Omega Technology

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