The eps before and after change in capital structure

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Reference no: EM131958449

Consider a firm with an EBIT of $556,000. The firm finances its assets with $1,060,000 debt (costing 6.1 percent) and 206,000 shares of stock selling at $13.00 per share. The firm is considering increasing its debt by $900,000, using the proceeds to buy back 81,000 shares of stock. The firm is in the 35 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $556,000.

Calculate the EPS before and after the change in capital structure.

Reference no: EM131958449

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