Consider a firm with an EBITDA of $13,00,000 and an EBIT of $10,500,000. The firm finances its

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Consider a firm with an EBITDA of $13,00,000 and an EBIT of $10,500,000. The firm finances its assets with $50,000,000 debt (costing 6.5 percent) and 10,000,000 shares of stock selling at $10.00 per share. The firm is considering increasing its debt by $25,000,000, using the proceeds to buy back shares of stock. The firm’s tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $10,500,000. Calculate the change in the firm’s EPS from this change in capital structure.

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Related Book For  answer-question

Finance Applications And Theory

ISBN: 9781260013986

5th Edition

Authors: Marcia Cornett, Troy Adair, John Nofsinger

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