Can someone tell me where they got the 10?

22. Wealth and Health Company is financed entirely by common stock which is priced to offer a 15% expected return. The common stock price is $40/share. The earnings per share is expected to be S6. If the company repurchases 25% of the common stock and substitutes an equal value of debt yielding 5%, what is the expected value of earnings per share after refinancing? (Ignore taxes.) A) $6.00 B) $7.52 C) $7.20 D) None of the above Answer: C Type: Difficult Page: 452 Response: I = (10)(0.06-0.60; new EPS = (6-0.60)0.75-37.20 share