Problem - Green Manufacturing, INC., plans to announce that it will issues $1.93 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a coupon rate of 5 percent. Green is currently an all equity firm worth $5.08 million with 330,000 shares of common stock outstanding. After the sale of the bonds. Green will maintain the new capital structure indefinitely. Green currently generates annual pretax earnings of $1.43 million. This level of earnings is expected to remain constant in perpetuity. Green is subject to a corporate tax rate of 35 percent.
Expected return is 18.30 %
Price per share is 15.40
New Share price 17.44
Shares repurchased 110665.14
New Shares outstanding 219334.86
What is the required return on Green's equity after the restructuring? Required Return?