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Earnings per share-southern stone corp

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Southern Stone Corp is considering a change in its capital structure. Currently, it is an all-equity firm with 19,300 shares of stock outstanding and a total market value of $358,000. Based on its current capital structure, the firm is expected to have earnings before interest and taxes of $29,000 if the economy is normal, $16,400 if the economy is in a recession, and $41,600 if the economy booms. Ignore taxes. The management is considering issuing $89,800 of debt with an interest rate of 8 percent. If the firm issues the debt, the proceeds will be used to repurchase stock. What will the earnings per share be if the debt is issued and the economy booms?

Reference no: EM132601908

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