Question 4 (10 marks) The CFO of the CSC Ltd is considering a recapitalization plan that would convert CSC from its current all-equity capital structure to one including substantial financial leverage. At present, CSC has 250,000 ordinary shares outstanding, which are selling for $60.00 each, and the recapitalization proposal is to issue $7,500,000 worth of long-term debt at an interest rate of 6.0 per cent and use the proceeds to repurchase 125,000 ordinary shares worth $7,500,000. CSC's expected EBIT next year will be $2,000,000. Assume there are no market frictions such as corporate or personal income taxes, (a) Calculate the number of shares outstanding, the share price and the debt-to-equity ratio for CSC if the proposed recapitalization is adopted. Show all workings. (b) Calculate the expected earnings per share and return on equity for CSC's shareholders under the expected EBIT for both the current all-equity capitalization and the proposed mixed debt/equity capital structure. Show all workings