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Consider a firm with an EBIT of $855,000. The firm finances its assets with $2,550,000 debt (cusilng 8 percent and is all tax deductible) and

image text in transcribed Consider a firm with an EBIT of $855,000. The firm finances its assets with $2,550,000 debt (cusilng 8 percent and is all tax deductible) and 450,000 shares of stock selling at $6.00 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 250,000 shares of stock. The firm's tax rate is 21 percent The change in capitai structure will have no effect on the operations of the firm. Thus, EEIT will remain at $855,000. Calculate the change in the firm's EPS from this change in capital structure. Note: Do not round intermediote colculations and round your finol onswers to 2 decimal places

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