A firm issues 100,000 shares of common stock with a total market value of $5,000,000 and an equal amount of debt. The firm is expected to generate $1.5 million in operating income and pay $400,000 in interest. If the firm does not pay tax, what will happen to EPS if the firm repurchases $2,500,000 of shares and substitutes an equal amount of additional debt?

Question 2 options:

	EPS increases by 80% to $22.50.
	EPS increases by 63.6% to $18.00.
	EPS increases by 20% to $15.00.
	EPS decreases by 6.7% to $11.67.
	EPS decreases by 33.3% to $10.00.