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Tartan Industries currently has total capital equal to $4 million, has zero debt, is in the 25% federal-plus-state tax bracket, has a net income of $3 million, and distributes 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 6% per year, 290,000 shares of stock are outstanding, and the current WACC is 12.20%. The company is considering a recapitalization where it will issue $1 million in debt and use the proceeds to repurchase stock. Investment bankers have estimated that if the company goes through with the recapitalization, its before-tax cost of debt will be 9% and its cost of equity will rise to 14.5%. a. What is the stock's current price per share (before the recapitalization)? Do not round intermediate calculations. Round your answer to the nearest cent. $ 70.81 b. Assuming that the company maintains the same payout ratio, what will be its stock price following the recapitalization? Assume that shares are repurchased at the price calculated in part a. Do not round intermediate calculations. Round your answer to the nearest cent. $ 42.12 Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 80% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, FRF, is 5%; the market risk premium, RPM, is 7%; and the firm's tax rate is 25%. Currently, SSC's cost of equity is 14%, which is determined by the CAPM. What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Do not round intermediate calculations. Round your answer to two decimal places. 18.37 %