An entity reported an EBIT of $55,200.The firm finances its assets with $102, 000 debt (costing 5.7 percent) and $20,200 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by $90,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $55,200. What is the EPS after the change in capital structure?
An entity reported an EBIT of $55,200.The firm finances its assets with $102, 000 debt (costing 5.7 percent) and $20,200 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by $90,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $55,200. What is the EPS after the change in capital structure?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An entity reported an EBIT of $55,200.The firm finances its assets with $102, 000 debt (costing 5.7 percent) and $20,200 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by $90,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $55,200.
What is the EPS after the change in capital structure?
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