Installer Solutions is an unlevered firm with total capital equal to $5 million, is in the 25% federal-plus-state tax bracket, and has a net income of $2 million, on which it paid out $600,000 in dividends. Installer expects net income to grow at a constant rate of 5% per year. The firm has 100,000 shares of stock outstanding, and the current WACC is 9.80%.

The firm is considering a recapitalization where it will issue $3 million is debt and use the proceeds to repurchase stock. Investment bankers have estimated that if the firm goes through with the recapitalization, the firm's before-tax cost of debt will be 8% and its cost of equity will be 14%.

A. What is the stocks current price per share (before the recapitalization)?

B. Assuming the firm 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.

Group of answer choices

A. $135.62; B. $79.27

A. $138.41; B. $94.13

A. $112.85; B. $127.43

A. $131.25; B. $82.57