KLM Sdn Bhd foresees that its pre-recapitalization earnings for the fiscal year will amount to RM7.3 million. The company presently possesses a total of 900,000 outstanding common stock shares and does not carry any debt. The shares of the company are now being traded at a price of RM40. The company is currently contemplating a recapitalization strategy in which it plans to issue debt valued at RM10.0 million, with a yield to maturity of 10 percent. The proceeds from this debt issuance will then be utilised to repurchase common shares. Given the hypothetical scenario where the stock price remains unchanged and, the company's tax rate is assumed to be 27%. What would be the company's earnings per share if it were to proceed with the recapitalization?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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KLM Sdn Bhd foresees that its pre-recapitalization earnings for the fiscal year will amount to RM7.3 million. The company presently possesses a total of 900,000 outstanding common stock shares and does not carry any debt. The shares of the company are now being traded at a price of RM40. The company is currently contemplating a recapitalization strategy in which it plans to issue debt valued at RM10.0 million, with a yield to maturity of 10 percent. The proceeds from this debt issuance will then be utilised to repurchase common shares. Given the hypothetical scenario where the stock price remains unchanged and, the company's tax rate is assumed to be 27%. What would be the company's earnings per share if it were to proceed with the recapitalization?
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