2. Organic Donuts (OD) is a publicly traded all equity firm with a stable EBIT of Rs 10 million OD has 4 million shares

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2 Organic Donuts Od Is A Publicly Traded All Equity Firm With A Stable Ebit Of Rs 10 Million Od Has 4 Million Shares 1 (47.53 KiB) Viewed 16 times

2. Organic Donuts (OD) is a publicly traded all equity firm with a stable EBIT of Rs 10 million OD has 4 million shares outstanding the return on the market, Rm is 100%, the standard deviation of the market return is 18.0%, and the risk-free rate is 4.0%. The return on OD stock has a correlation of O 80 with the market return, and has a standard deviation of return of 22.5%. There are no taxes or transaction costs Assume M&M perfect capital markets • What is the required retum on unlevered equity for OD's stock? % (write to one decimal place, without % sign, 12.1% should be entered as 12.1) • What is OD's stock price assuming all eaming is distributed as income (round to one decimal place) • What is the value of the fim? (round to one decimal place, in millions. Eg 12.3 million) OD's management has decided to change the capital structure of the company to 50% debt. OD's debt is considered risk-free so it can borrow at the risk-free rate OD w use this debt issue to repurchase shares • How many shares are repurchased? (write to one decimal place, in millions) • What is the new EPS? (write to one decimal place) • What is the required retum on OD's levered equity? (write to one decimal place, 121% should be entered as 121) • What is the new share price (write to one decimal place) • What is the post-restructuring WACC for OD (write to one decimal place. 12 15 should be entered as 123)