Mayr Inc. currently has no debt in its capital structure. It has $50,000$ shares

outstanding that are selling for $$158.$ The firm's expected EBIT is $$355,500$ and it

pays $30\%$ taxes. The managers are considering issuing $$2,000,000$ in debt. They

will have to pay $4\mathrm{.}50\%$ interest on these bonds. They plan to use the proceeds of

the bond issue to repurchase shares at the current market price. Calculate the

EPS of the firm at both the original and relevered capital structures. If they

execute the bond issue and share repurchase what will be the increase or

decrease in EPS?

EPS will decrease by $$2\mathrm{.}31.$

EPS will increase by $$0\mathrm{.}21.$

EPS will decrease by $$0\mathrm{.}26.$

EPS will decrease by $$1\mathrm{.}26.$

EPS will remain the same.