13 Boston Lumber is unlevered with 222 shares outstanding and earnings before interest and taxes, orEBIT, of 750. Corporate earnings are taxed at a rate of 31%. Suppose that Boston Lumber makes adecision to partition its assets into debt and equity by using the newly raised debt capital to buy back aportion of the stock. The firm issues $1550 of debt at a cost of 8.65%. The partition does not changeEBIT but reduces the number of shares outstanding to 147. Which of the following is Boston Lumber'sEPS after the partition?$1.91$2.89$5.10$2.33

Calculation of Boston Lumber's EPS after the partition.

Answered: Boston Lumber is unlevered with 222…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...

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