Consider a firm with an ebit of 556000 the firm finances, Ask an Expert

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Consider a firm with an EBIT of $556,000. The firm finances its assets with $1,060,000 debt (costing 6.1 percent) and 206,000 shares of stock selling at $13.00 per share. The firm is considering increasing its debt by $900,000, using the proceeds to buy back 81,000 shares of stock. The firm is in the 35 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $556,000.

Calculate the EPS before and after the change in capital structure.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92796106

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