Finance - recapitalization problem?

eGames currently has $10 MM assets & no debt. The tax rate is 40%. eGames has 400,000 shares outstanding, which currently sell for $37.50 a share. Their current cost of equity is 12%.
The company鈥檚 CFO is proposing that the company issue $2,000,000 of debt at 10% cost. If the company buys back $2 MM of shares and issues $2 MM of debt, eGames鈥?cost of equity is expected to increase to 13.0%
The company had NI of $2 MM in the fiscal year which just ended and paid out 50% in dividends. The company expects to grow at a constant rate of 5% for the foreseeable future and maintain the same payout rate.

What is the stock price after recapitalization?
What is the WACC after recapitalization?

Stock Price=$18.85
WACC=12.06%

To find the stock price, you'll need:
鈥?(Earnings/Share) = EPS
鈥?Payout Ratio (given, 50%)
鈥?(Dividend/Share) = DPS
鈥?Discount Factor

For WACC, just go through the equation to find 12.06%.
Since $2M was used to buy back equity. The new equity component of the company will be

[(37.5)(400,000) - ($2,000,000)] = $13M

http://www.med.govt.nz/upload/13239/mars...

The product of DPS and the discount factor can provide the Discounted Dividends for a finite period of time.

To find the terminal value, use the Gordon Growth Model
http://www.understandfinance.com/img/tut...

Terminal Value + DDM = Stock Price