A levered firm has 68,000 shares of stock outstanding that sell for ​$20.52 per share and it carries $697,680 in perpetual debt that it issued at a cost of 6.9​%. It expects to earn an EBIT of
$82,000 per​ year, in​ perpetuity, and faces a corporate tax rate of 25​%. The​ firm's new management wishes to use a target​ debt-equity ratio of 0.4. To reach its​ target, it intends to raise funds using a seasoned equity offer​ (SEO) and use the proceeds to pay off some of its existing debt. The underwriter charges 5.0​% of the gross proceeds as an underwriting fee and it is anticipated that the stock price will drop to $20.08 per share on the announcement of the SEO.
Part A : How many shares will need to be issued to bring the​ firm's debt-equity ratio in line with​ management's target?
Shares​ issued:
Part B : What is the earnings per share​ (EPS) after the equity is issued and the proceeds are used to repay a portion of the​ debt? Assume the EBIT does not change.
The EPS after the equity issue is