Info
Warning
Danger
/ Homework Answers / Finance / Consider a firm with an EBIT of $1,019,000. The firm

Question

Consider a firm with an EBIT of $1,019,000. The firm finances its assets with $4,880,000 debt (costing 7.9 percent) and 219,000 shares of stock selling at $16.00 per share. To reduce risk associated with this financial leverage, the firm is considering reducing its debt by $2,800,000 by selling additional shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $1,019,000.

Calculate the EPS before and after the change in capital structure and indicate changes in EPS. (Negative answer should be indicated by a minus sign. Round your answers to 2 decimal places.)

 

Solution
5 (1 Ratings )

Solved
Finance 1 Month Ago 4 Views
This Question has Been Answered!
Premium Content -

Unlimited Access

Explore More than 2 Million+
  • Textbook Solutions
  • Flashcards
  • Homework Answers
  • Documents
Signup for Better Grades!

Ask an Expert

Our Experts can answer your tough homework and study questions
217143 Finance Questions Answered!
Post a Question