Your company is considering a recapitalisation plan that would convert it from its current all- equity capital structure to one including some financial leverage. Your company now has 10,000,000 shares of common stock outstanding, which are selling for R40 each. You expect the company's EBIT to be R50,000,000 per year, for a foreseeable future. The recapitalisation proposal is to issue R100,000,000 worth of long-term debt, at an interest rate of 6.50%, and use the proceeds to repurchase as many shares as possible, at a price of R40 per share. Assume there are no market frictions such as corporate or personal income taxes. Calculate the expected return on equity for the shareholders, under both the current all-equity capital structure and under the recapitalisation plan. Required: 3.1. Calculate the number of shares outstanding, the per share price, and the debt-to- equity ratio for the company if it adopts the proposed recapitalisation. Calculate the earnings per share (EPS) and the return on equity for the company shareholders, under both the current all-equity capitalisation and the proposed mixed debt/equity capital structure. Calculate the break-even level of EBIT, where earnings per share for the shareholders are the same, under the current and proposed capital structures. At what level of EBIT will your company shareholders earn zero EPS under the current and proposed capital structures? 3.3. 3.4