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Company GHI is all equity financed. Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase

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Company GHI is all equity financed. Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Fill in the values (a through (D) in the table below to show how earnings per share vary with operating income after the restructuring PRE-RESTRUCTURING DATA Number of Shares 100,000 Price per Share $10 Market Value of Shares $1,000,000 POST-RESTRUCTURING DATA Number of Shares 75,000 Price per Share $10 Market Value of Shares $750,000 Market Value of Debt $250,000 (10%) POSSBLE OUTCOMES State of the Economy Slump Normal Boom $75,000 Profits before Interest $125,000 $175,000 Interest (a) (e) (i) = 5 Equity (b) (f) 6) Earnings (c) (g) (k) Earnings per Share (d) (h) (0) Return on Shares

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