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Consider a firm with an EBIT of 5857,000. The firm finances its assets with $2.570,000 debt (costing 8.2 percent and is all tax deductible) and
Consider a firm with an EBIT of 5857,000. The firm finances its assets with $2.570,000 debt (costing 8.2 percent and is all tax deductible) and 470.000 shares of stock selling at $800 per share. To reduce the firm's risk associated with this financial leverage the firm is considering reducing its debt by $1,000,000 by selling an additional 270,000 shares of stock. The firm's tax rate is 21 percent The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at 5857000 Calculate the change in the firm's EPS from this change in capital structure (Do not round intermediate calculations and round your final answers to 2 decimal places.) EPS before EPS after Difference
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