Capital structure and stock split

Reference no: EM1337060

1. Ethier enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.3% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk?

2. Suppose you own 2000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $80 per share. Laurence announces a 2-for-1 stock split. Immediately after the split, how many shares will you have, what will the adjusted EPS and DPS be, and what would you expect the stock price to be?

Reference no: EM1337060

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