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Donaldsen International is an all-equity firm with a current share price of $12.50 and10,000 shares outstanding.Management is considering issuing $50,000 of debt at an interest
Donaldsen International is an all-equity firm with a current share price of $12.50 and10,000 shares outstanding.Management is considering issuing $50,000 of debt at an interest rate of 6.5 percent and using the proceeds to repurchase shares.It is felt that the company will have earnings before interest and taxes (EBIT) of $30,000. The company tax rate is 30%.What will the earnings per share (EPS) be if the debt is issued?
a. $1.34
b. $2.10
c. $3.00
d. $3.21
e.$1.87
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