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A company with a share price of $53 has shares outstanding of 6 million and net...

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Finance

A company with a share price of $53 has shares outstanding of 6million and net income of $20 million. The company conducts aleverage recapitalization to alter its capital structure byborrowing $3 million and using the proceeds to buy back shares. Thepre-tax cost of debt is 5% and the company's tax rate is 35%.

What will be the new earnings per share after the leveragerecapitalization?

Answer is 3.35 but not sure how...

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A company with a share price of $53 has shares outstanding of 6million and net income of $20 million. The company conducts aleverage recapitalization to alter its capital structure byborrowing $3 million and using the proceeds to buy back shares. Thepre-tax cost of debt is 5% and the company's tax rate is 35%.What will be the new earnings per share after the leveragerecapitalization?Answer is 3.35 but not sure how...

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