Question 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?
Question 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?