Question 22 Not yet answered Marked out of 3.50 Tempquin Motors is an all-equity firm with a total market value of $270 millions annual before tax operating income (EBIT) is $35.5 million and expected to be stable for the distant future. The firm has on shares outstanding. Tempquinhas no future growth opportunities so pays out all its earnings as dividends. The firm is contemplating a recapitalization plan which involves borrowing 585 million in debt at the rate of 4.6% and using the proceeds to buy back some of its shares. This plan will not alter the size or capability of the operations, so operating income is expected to remain unchanged. The plan will also not affect its dividend payout policy. Assume perfect capital markets. 4 15 Flag Question 22 23 (a) What is the dividend per share before the recapitalization? (Give answer to 4 decimal places) (b) What would be the dividend per share if the recapitalization goes ahead? $ (Give answer to 4 decimal places) (c) A shareholder owns 500 Tempquin shares and does not sell them during the buyback. What will be the increase in total dividends the shareholder can expect to receive from the change in the firm's capital structure? (Give answer to 2 decimal places) Question 23 Three years you founded your own company. You invested $210,000 of your own money and received 5.8 milion Class A preference