Texas Instruments is an all-equity company and currently has 7,300 shares of common stock. Each share can be bought or sold for $19 in today's market.

Texas Instruments is considering borrowing $64,000 by selling corporate bonds, and using the raised money to buy back a part of its outstanding shares of stock from the market. The yield to maturity (or the annual rate of return) for these bonds is 8 %.

Calculate Texas Instruments' earnings per share at the break-even level of the company's EBIT, such that Texas Instruments' stockholders are neutral to Texas Instruments being financially levered or unlevered.

Answer rating: 100% (QA)

To calculate the earnings per share EPS at the breakeven level of EBIT we first need to determine th... View the full answer