Question 4: (12 marks) Harpers Inc. is an all-equity firm with 2,000,000 shares outstanding. It has $2,000,000 of EBIT, which is expected to remain constant in the future. The company pays out all of its earnings, so earnings per share (EPS) equal dividends per shares (DPS). Its tax rate is 40%. The company is considering issuing $4,000,000 of 10.0% bonds and using the proceeds to repurchase common stocks. The risk-free rate is 6.5%, the market risk premium is 5.0%, and the beta is currently 0.90, but the CFO believes beta would rise to 1.10 if the recapitalization occurs Assuming that the common stocks can be repurchased at the price that existed prior to the recapitalization, what would the price be following the recapitalization? Should Harpers proceed with the exercise? Explain. (20 marks)