The following facts apply to the ABC Company Should the finn issue $500,000 of .10 debt if
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The following facts apply to the ABC Company
Should the finn issue $500,000 of .10 debt if 50,000 shares can be purchased at a price of $1O? Assume the only criterion for debt issuance is the effect on EPS.
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E k = .10, t = .35, (1-to)k = .065, P/E = 20 and == .05 P V = $1,000,000, N = 100,000, E = $50,000, EPS = $.50, EBIT $76,923, Stock price = $10
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