Question
Oak Farms is an unlevered firm with 2220 shares outstanding and an EBIT of 700 . Corporate earnings are taxed at a rate of 37
Oak Farms is an unlevered firm with2220shares outstanding and an EBIT of700. Corporate earnings are taxed at a rate of37%.
Calculate EPS for Oak Farms. $_______________Note: Your answer should be in dollars and cents. For example, $0.99.
Suppose that Oak Farms makes a decision to partition (split) its assets into debt and equity. The firm issues $1450of debt at a cost of7.85%, and uses these funds to reduce the amount of equity on its books. The partition does not change the EBIT or the tax rate, but does reduce the number of shares outstanding to1470.
Compute Oak Farms EPS after the partition. $_____________Note: Your answer should be in dollars and cents.
You Must Get Both Parts Correct to Receive Credit
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