5. (10 points) The Kim Su Company is planning to repurchase shares of common stock with the proceeds of a $50,000,000 debt issue. The interest rate on the debt is expected to be 10%. Currently, Kim Su is unlevered with 12,000,000 common shares outstanding. The price-earnings ratio of the common shares is 5 on pre-tax operating income of $30,000,000. The equity has a required rate of return of 20% based on an equity beta of 1.20. Assuming the company's tax rate is 34%, there are no personal taxes and all cash flows are level perpetuities, answer the following questions. (1) Compute the company's earnings per share, stock price and market value before the debt issue and stock repurchase. (4 points) (2) Compute the company's earnings per share, stock price and market value after the debt issue and stock repurchase. (6 points) (Hint: After the repurchase we have fewer shares: Shares repurchased -N =D/PN where PN is the price of the repurchase and the price after the repurchase) So, D- (N)(PN) and we know E-(PN) (Shares outstanding - N) from the 2 equations above we can solve for PN and N.)