A firm has a current capital structure consisting of $400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary income. If the EBIT is expected to be $200,000, the firm's earnings per share will be ________.
A) $2.40
B) $3.04
C) $7.04
D) $1.82

Question

Quizplus · Accepted Answer

The Answer of A firm has a current capital structure consisting of $400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary income. If the EBIT is expected to be $200,000, the firm's earnings per share will be ________.
A) $2.40
B) $3.04
C) $7.04
D) $1.82

A Firm Has a Current Capital Structure Consisting of $400,000