Ayna Inc. is an all-equity firm with 400,000 shares outstanding. It has P3,000,000 of EBIT, and EBIT 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), and its tax rate is 25%. The company is considering issuing P5,000,000 of 12.00% bonds and using the proceeds to repurchase stock. The risk-free rate is 4.5%, the market risk premium is 5.0%, and the firm's beta is currently 0.90. However, the CFO believes the beta would rise to 1.10 if the recapitalization occurs. Assuming the shares could be repurchased at the price that existed prior to the recapitalization,
Ayna Inc. is an all-equity firm with 400,000 shares outstanding. It has P3,000,000 of EBIT, and EBIT 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), and its tax rate is 25%. The company is considering issuing P5,000,000 of 12.00% bonds and using the proceeds to repurchase stock. The risk-free rate is 4.5%, the market risk premium is 5.0%, and the firm's beta is currently 0.90. However, the CFO believes the beta would rise to 1.10 if the recapitalization occurs. Assuming the shares could be repurchased at the price that existed prior to the recapitalization, what would the price per share be following the recapitalization? (Round final answer to the nearest centavo or two decimal places)
(Hint: P0 = EPS/rs because EPS = DPS; Repurchased stocks =
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