The following information applies to RTC Logistics Ltd.:

Operating income (EBIT) = RM300,000

Shares outstanding = 120,000 shares

Debt = RM100,000

EPS = RM1.45

Interest expense = RM10,000

Stock price = RM17.40

Tax rate = 40%

The company is considering recapitalization where it would issue RM348,000 worth of new debt and use the proceeds to buy back RM348,000 worth of common stock. The buyback will be undertaken at the pre-recapitalization share price of RM17.40 per share. The recapitalization is not expected to have an effect on operating income or the tax rate. After the recapitalization, the companys total interest expense will be RM50,000.

Required:

Assume that the recapitalization has no effect on the companys price earnings (P/E) ratio. What is the expected price of the companys stock following the recapitalization? Should RTC proceed with the recapitalization exercise? Explain.