Aaron Corp. is all-equity financed and expects zero growth. The expected EBIT = $500,000, Tax rate = 40%, 100,000 shares outstanding. If the company recapitalizes, debt would be issued to repurchase stock.

Debt Percent (Wd) Equity Percent (We) Before-tax cost of debt (rd)

0.20 0.80 8.2%

The company uses the CAPM to estimate its cost of common equity. The risk-free rate is 5 percent and the market risk premium is 6 percent. Its unlevered beta, bU, equals 1.6. What will be the stock price if the firm first recapitalizes to 20