Blemker Corporation has $500 million of total assets its basicearning power is 1

Blemker Corporation has $500 million of total assets its basicearning power is 15% and it currently has no debt in its capitalstructure. The CFO is contemplating a recapitalization where itwill issue debt at a cost of 10% and use the proceeds to buy backshares of the companys common stock paying book value. If thecompany proceeds with the recapitalization its operating incometotal assets and tax rate will remain unchanged. Which of thefollowing is most likely to occur as a result of therecapitalization?