Use the following information to answer the question(s) below. Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets. Nielson's EPS if they change their capital structure is closest to: OA. $2.30 OB. $2.90 OC. $2.50 OD. $2.00
Use the following information to answer the question(s) below. Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets. Nielson's EPS if they change their capital structure is closest to: OA. $2.30 OB. $2.90 OC. $2.50 OD. $2.00
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 15P
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![Use the following information to answer the question(s) below.
Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is
considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets.
Nielson's EPS if they change their capital structure is closest to:
OA. $2.30
O B. $2.90
O C. $2.50
O D. $2.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F124085de-71da-4f42-b7e2-195704976674%2F523152cd-48e7-4844-b304-4765a919284d%2Fr6kvcv_processed.png&w=3840&q=75)
Transcribed Image Text:Use the following information to answer the question(s) below.
Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is
considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets.
Nielson's EPS if they change their capital structure is closest to:
OA. $2.30
O B. $2.90
O C. $2.50
O D. $2.00
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