Please help with both questions

2. The following information applies to Lott Enterprises Operating Income (EBIT) outstanding120,000 Debt $1.45 Interest expense price Tax rate $300,000 Shares S100,000 EPS $10,000 Stock $17.40 40% The company is considering a recapitalization where it would issue $348,000 worth of new debts and use the proceeds to buy back $348,000 worth of common stock The buyback will be at the current stock price of $17.40. The recapitalization will have no effect on the operating income or tax rate. After recapitalization, the company's interest expense will be $50,000 Assuming that the recapitalization has no effect on the company's P/E ratio, what will be the expected stock price after recapitalization? 3. Simon Software Co. is trying to estimate its optimal capital structure. Right now, Simon has a capital structure that consists of 20% debt and 80% equity. The risk-free rate is 6% and the market risk premium is 5%. Currently the company's cost of equity is 12% and its tax rate is 40% What would be Simon's estimated cost of equity if it were to change its capital structure to 50% debt and 50% equity