River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $300,000 of debt at an interest rate of 12% and use the proceeds to repurchase 30,000 shares at $10 per share. Profits before interest are expected to be $130,000.   What is the ratio of price to expected earnings for River Cruises before it borrows the $300,000? What is the ratio after it borrow?

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