Question
Consider a company with the following information: Share price = $600 Total earnings = $40 billion Shares outstanding = 0.80 billion (800 million) Earnings per
Consider a company with the following information:
- Share price = $600
- Total earnings = $40 billion
- Shares outstanding = 0.80 billion (800 million)
- Earnings per share = $40 billion / 0.8 billion = $50
The company is considering taking on $12 billion in debt to conduct a levered recapitalization. The pretax cost of debt (rd) would be 4%, and the companys tax rate is 30%.
If the firm conducts the leverage recapitalization, what will be the companys new EPS?
Answer is 50.85 But I am not sure how...
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Financial Markets and Institutions
Authors: Jeff Madura
12th edition
9781337515535, 1337099740, 1337515531, 978-1337099745
