Buggins Inc. is financed equally by debt and equity, each with a market value of $1 million. The cost of debt is 5%, and the cost of equity is 10%. The company now makes a further $250,000 issue of debt and uses the proceeds to repurchase equity. This causes the cost of debt to rise to 5.5% and the cost of equity to rise to 10.83%. Assume the firm pays no taxes. Equity = $1,000,000 and Debt = $1,000,000 Debt issued = $250,000 and Repurchased equity = $250,000

What is the percentage increase in earnings per share after the refinancing?

What is the new price-earnings multiple?