"Increasing financial leverage increases both the cost of debt $(r_{\text{d}\text{e}\text{b}\text{t}})$ and the cost of equity $(r_{\text{e}\text{q}\text{u}\text{i}\text{t}\text{y}}).$ So the overall cost of capital

cannot stay constant." This problem is designed to show that the speaker is confused. Buggins Incorporated. is financed equally by

debt and equity, each with a market value of $$2\mathrm{.}4$ million. The cost of debt is $6\mathrm{.}4\%,$ and the cost of equity is $11\mathrm{.}4\%.$ The company now

makes a further $$600,000$ issue of debt and uses the proceeds to repurchase equity. This causes the cost of debt to rise to $6\mathrm{.}9\%$ and

the cost of equity to rise to $19\mathrm{.}23\%.$ Assume the firm pays no taxes.

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a$.$ How much debt does the company now have?

b$.$ How much equity does it now have?

c$.$ What is the overall cost of capital?

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to $1$ decimal place.

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

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to $2$ decimal places.

e$.$ What is the new price$-$earnings multiple? $($Hint: Has anything happened to the stock price?$)$

Note: Round your answers to $2$ decimal place.