DEF Sdn$.$ Bhd$.($DSB$)$ has made the following forecast for the upcoming year based on the company$$s current capitalization:

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Interest expense$$RM$2,000,000$

Operating income $($EBIT$)$RM$20,000,000$

Earnings per share$$RM$3\mathrm{.}60$

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The company has RM$20$ million worth of debt outstanding, and all of its debt yields $10$ percent.$$The company$$s tax rate is $26$ percent.$$The company$$s price$-$earnings $($P$/$E$)$ ratio has traditionally been $12.$

The company$$s investment bankers have suggested that the company recapitalize.$$Their suggestion is to issue enough new bonds at a yield of $10$ percent to repurchase $1$ million shares of common stock.$$Assume that the stock can be repurchased at today$$s RM$40$ stock price.

Assume that the repurchase will have no effect on the company$$s operating income; however, the repurchase will increase the company$$s dollar interest expense.$$Also$,$ assume that as a result of the increased financial risk the company$$s price$-$earnings $($P$/$E$)$ ratio will be $11\mathrm{.}5$ after the repurchase.$$

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Based on the above information:

a$.$What is the net income before the change?

b$.$How many shares are currently outstanding?

c$.$What is the current stock price?

d$.$What would be the expected year$-$end stock price if the company proceeded with the recapitalization? Should DSB proceed with the recapitalization?