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3 Consider a firm with an EBIT of $861,000. The firm finances its assets with $2,610,000 debt (costing 7.5 percent and is all tax deductible)

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Consider a firm with an EBIT of $861,000. The firm finances its assets with $2,610,000 debt (costing 7.5 percent and is all tax deductible) and 510,000 shares of stock selling at $5.00 per share. To reduce the firm's risk associated with this financial leveroge, the firm is considering reducing its debt by $1,000,000 by selling an additional 310,000 shares of stock. The firm's tax rate is 21 percent. The change in copital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $861,000. Calculate the change in the firm's EPS from this change in copital structure. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Answer is complete but not entirely correct

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