calculate the expected EPS for option 3 given an anticipated EBIT of $50,000,000

Case 3: Capital Budgeting, Capital Structure, and the Cost of Capital Company DEF has enjoyed several consecutive profitable years and has accumulated $80,000,000 in cash and marketable securities. The company is considering multiple potential uses for the excess cash. Option 1: Option 2: Build a new manufacturing facility at an initial cost of $20,000,000. The facility is expected to generate an additional $7,000,000 in annual sales. Assume no new fixed costs and variable costs equal to 55% of sales. For depreciation calculations, assume a 10-year life and straight-line depreciation. I Use half of the current cash balance to repurchase shares of outstanding stock through a tender offer (4,000,000 shares at $10 per share). Use half of the current cash balance to pay off long-term debt. Pay a special dividend of $4.00 per share. Increase the regular dividend to $4.00 per share. Option 3: Option : Option : The company has 10,000,000 shares of stock outstanding that are currently priced at $10 per share. The company paid a dividend of $1.25 per share last year and expects dividends to grow at 4% annually. It also has 180,000 bonds outstanding that pay a 6% coupon rate and mature in 5 years. The current price of the bonds is $980. Assume semi-annual interest payments. The tax rate is 21%. Hint: To calculate cash flows for years 1-10: CF70 = Sales - VC-Dep = EBIT - Taxes = NI + Dep = OCF