A company that has an EPS of $ 7.00, with sales of $ 1,000,000.00, share capital of $ 2,500,000.00 with a value of $ 100.00 per share, that expects to maintain its sales and that wants to estimate what would happen if it modified its capital structure with a debt of 25 %, 50% and 75% with interest rates of 10%, 12% and 18% respectively, you can be sure of:
A company that has an EPS of $ 7.00, with sales of $ 1,000,000.00, share capital of $ 2,500,000.00 with a value of $ 100.00 per share, that expects to maintain its sales and that wants to estimate what would happen if it modified its capital structure with a debt of 25 %, 50% and 75% with interest rates of 10%, 12% and 18% respectively, you can be sure of:
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 7P
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4. A company that has an EPS of $ 7.00, with sales of $ 1,000,000.00, share capital of $ 2,500,000.00 with a value of $ 100.00 per share, that expects to maintain its sales and that wants to estimate what would happen if it modified its capital structure with a debt of 25 %, 50% and 75% with interest rates of 10%, 12% and 18% respectively, you can be sure of:
a) That its EPS will increase as the capital structure is increasingly transferred to debt.
b) That its EPS will remain the same regardless of the capital structure chosen.
c) That its EPS will decrease as the capital structure is increasingly transferred to debt.
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