Consider a firm with an ebit of 11800000 the firm finances, Ask an Expert

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Consider a firm with an EBIT of $11,800,000. The firm finances its assets with $52,600,000 debt (costing 7.3 percent) and 11,300,000 shares of stock selling at $8.00 per share. The firm is considering increasing its debt by $26,000,000, using the proceeds to buy back shares of stock. The firm is in the 30 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $11,800,000.

Calculate the EPS before and after the change in capital structure and indicate changes in EPS. (Round your answers to 3 decimal places.)

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Financial Management, Finance

Category:- Financial Management
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