0% Debt, U 60% Debt, L

Oper. income (EBIT) $400,000 $400,000

Required investment $2,500,000 $2,500,000

% Debt 0.0% 60.0%

$ of Debt $0.00 $1,500,000

$ of Common equity $2,500,000 $1,000,000

Interest rate NA 10.00%

Tax rate 35% 35%

If the stock price is $80 per share, what would be the earnings per share under the leveraged capital structure?

A. $8.00

B. $10.25

C. $11.50

D. $13.00

E. $13.67