Cyberdyne Systems generates perpetual annual EBIT of $200. (Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year.) Cyberdyne has 1,000 shares outstanding which trade for $1.33. The stockholders of Cyberdyne require a return of 9%. Assume that Cyberdyne is initially all-equity financed. It is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares. The repurchased shares will be canceled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 3%. Assume that the tax rate is 40%.
What is the stock price after the repurchase is complete?