Consider a firm with an EBIT of \($750,000\). The firm finances its assets with \($1,600,000\) debt (costing 5 percent and all is tax deductible) and 200,000 shares of stock selling at \($6.00\) per share. To reduce the firm’s risk associated with this financial leverage, the firm is considering reducing its debt by

\($600,000\) by selling an additional 100,000 shares of stock. The firm’s tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at

\($750,000\). Calculate the dilution in the firm’s EPS from this change in capital structure.