The Megalops Company has no debt outstanding and its financial position is given by the following...

  

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The Megalops Company has no debt outstanding and its financial position is given by the following data: Expected EBIT $800,000 Growth rate in EBIT, 0% g Cost of equity, r 8% Shares outstanding, 250,000 In Tax rate 25% Megalops plans to sell bonds and repurchase stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity will increase to 12%. Bonds can be sold at a cost of 7%. Based on the new capital structure what is the new earnings per share? The Megalops Company has no debt outstanding and its financial position is given by the following data: Expected EBIT $800,000 Growth rate in EBIT, 0% g Cost of equity, r 8% Shares outstanding, 250,000 In Tax rate 25% Megalops plans to sell bonds and repurchase stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity will increase to 12%. Bonds can be sold at a cost of 7%. Based on the new capital structure what is the new earnings per share?

Answer rating: 100% (QA)

Calculate the Earnings Before Interest and Taxes EBIT From the image the EBI... View the full answer