this was the only q my lect gave

Merah Berhad has made the following forecast for the upcoming year based on the companys current capitalization:

Interest expense	RM2,000,000
Operating income (EBIT)	Operating income (EBIT)
Earnings per share	Earnings per share

The company has RM20,000,000 worth of debt outstanding and all of its debt yields 10 %. The companys tax rate is 30%. The companys price-earnings (P/E) ratio has traditionally been 10. The companys investment bankers have suggested that the company recapitalize. Their suggestion is to issue enough new bonds at a yield of 10% to repurchase 1,400,000 shares of common stock.

Assume that the repurchase will have no effect on the companys operating income; however, the repurchase will increase the companys dollar interest expense. Also, assume that as a result of the increased financial risk, the companys price-earnings (P/E) ratio will be 10.5x after the repurchase.

Required:

a) What is the net income before the change?

b) How many shares are currently outstanding?

c) What is the current stock price?

d) What would be the expected year-end stock price if the company proceeded with the recapitalization? Should Merah Berhad proceed with the recapitalization?

Merah Berhad has made the following forecast for the upcoming year based on the company's current capitalization: Interest expense RM2,000,000 Operating income (EBIT) Operating income (EBIT) Earnings per share Earnings per share The company has RM20,000,000 worth of debt outstanding and all of its debt yields 10 %. The company's tax rate is 30%. The company's price-earnings (P/E) ratio has traditionally been 10'. The company's investment bankers have suggested that the company recapitalize. Their suggestion is to issue enough new bonds at a yield of 10% to repurchase 1,400,000 shares of common stock. Assume that the repurchase will have no effect on the company's operating income; however, the repurchase will increase the company's dollar interest expense. Also, assume that as a result of the increased financial risk, the company's price-earnings (P/E) ratio will be 10.5x after the repurchase. Required: a) What is the net income before the change? b) How many shares are currently outstanding? c) What is the current stock price? d) What would be the expected year-end stock price if the company proceeded with the recapitalization? Should Merah Berhad proceed with the recapitalization? Merah Berhad has made the following forecast for the upcoming year based on the company's current capitalization: Interest expense RM2,000,000 Operating income (EBIT) Operating income (EBIT) Earnings per share Earnings per share The company has RM20,000,000 worth of debt outstanding and all of its debt yields 10 %. The company's tax rate is 30%. The company's price-earnings (P/E) ratio has traditionally been 10'. The company's investment bankers have suggested that the company recapitalize. Their suggestion is to issue enough new bonds at a yield of 10% to repurchase 1,400,000 shares of common stock. Assume that the repurchase will have no effect on the company's operating income; however, the repurchase will increase the company's dollar interest expense. Also, assume that as a result of the increased financial risk, the company's price-earnings (P/E) ratio will be 10.5x after the repurchase. Required: a) What is the net income before the change? b) How many shares are currently outstanding? c) What is the current stock price? d) What would be the expected year-end stock price if the company proceeded with the recapitalization? Should Merah Berhad proceed with the recapitalization