Assume the following facts about a company: $\begin{array}{llll}
\text { Capital (000's) } && \text { EBIT (000's) } & \$ 1,000 \
\text { Debt } & - & \text { Lessinterest Expense }&-\
\text { Equity } & \underline{\$ 3,000} & \text { EBT } &\$1,000\
\text { Total Capital } &\$3,000& \text { Taxes@ 40\% }&400\\text { Sthares@ } \$ 10=300&&\text { Earnings after } \mathrm{T} a x&\$600
\end{array}$ What will be the company's new EPS if it borrows money at 10% interest and uses it to retire stock until capital is 40% debt? The stock can be purchased at its book value of $10 per share.
A) $3.33
B) $4.89
C) $2.93
D) None of the above

Question

Quizplus · Accepted Answer

The Answer of Assume the following facts about a company: $\begin{array}{llll}
\text { Capital (000's) } && \text { EBIT (000's) } & \$ 1,000 \
\text { Debt } & - & \text { Lessinterest Expense }&-\
\text { Equity } & \underline{\$ 3,000} & \text { EBT } &\$1,000\
\text { Total Capital } &\$3,000& \text { Taxes@ 40\% }&400\\text { Sthares@ } \$ 10=300&&\text { Earnings after } \mathrm{T} a x&\$600
\end{array}$ What will be the company's new EPS if it borrows money at 10% interest and uses it to retire stock until capital is 40% debt? The stock can be purchased at its book value of $10 per share.
A) $3.33
B) $4.89
C) $2.93
D) None of the above

Assume the Following Facts About a Company What Will Be the Company's New EPS If It Borrows