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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
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.
According to MM Proposition I, what is the stock price for Omega Technology?
Suppose Omega Technology stock currently trades for $11 per share. What arbitrage oppor- tunity is available? What assumptions are necessary to exploit this opportunity?
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