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FJM International is planning to finance a $20 million capital improvement program with half debt and half common stock. New shares can be sold for
FJM International is planning to finance a $20 million capital improvement program with half debt and half common stock. New shares can be sold for $50 a share, and the debt will carry a 12 interest rate. FJM currently has an all-equity capital structure with 1 million shares outstanding. If the firm has a 408 tax rate and expects earnings before interest and taxes (EBIT) of \$5 million, the new earnings per share will be A. $1.20 B. $1.36 C. $1.78 D. $1.90 E. $3.80
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