A firm is currently an all equity firm with a total market value of $11,500,000 with 1,200,000 shares of stock outstanding. The firm has expected EBIT of $1,440,000 if the economy is normal and $1,870,000 if the economy booms. The firm is considering a $4,500,000 bond issue with an attached interest rate of 6 percent. The bond proceeds will be used to repurchase shares. Ignore taxes. What will the earnings per share be after the repurchase if the economy is normal?

Answer rating: 100% (QA)

If the economy is typical we need to find earnings per share EPS after repurchasing shares with bond ... View the full answer