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A company has no debt outstanding and a total market value of $182,000. Earnings before interest and faxes, EBIT, is projected to be $28,000 if
A company has no debt outstanding and a total market value of $182,000. Earnings before interest and faxes, EBIT, is projected to be $28,000 if economic conditions are normal If there is a good surprise, then EBIT will be 26 percent higher. If there is a bad surprise, then EBIT will be 39 percent lower. The company is considering a $61,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,300 shares outstanding. Assume the market-to-book ratio is 10, there are no taxes for this problem, and the company goes through with the recapitalization before any surprise occurs. What will earnings per share, EPS, be if there is a good surprise? Enter your answer in the box shown below as dollars with 2 digits to the right of the decimal point. Your
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