Northgate Inc. has 20 million shares outstanding, which are trading at $60 per share. Northgate maintains a constant debt level of $100 million. Suppose Northgate announces the following recapitalization plan: it will issue additional $600 million of debt and use all the proceeds to repurchase shares. After this recapitalization, it will maintain its debt level indefinitely. The tax rate is 35% and the annual interest rate of the debt is 7%.

Assume that the only financial friction is tax, answer Question a) and Question b).

a. What will be the value of equity after the recapitalization?

The value of equity after recapitalization will be $ _______ million. (Round to nearest integer.)

b. What is the stock price after the announcement? How many shares will the firm repurchase and how many shares will remain outstanding after the recapitalization?

The stock price will be $__________ after the announcement. The firm will repurchase _________ million shares, and ________million shares will remain outstanding after the recapitalization. (Round to two decimal places.)