Question 6 (2 points) Oxford Inc. currently has 1,200,000 common shares outstanding and $12,000,000 debt (face value is equal to market value) with a coupon rate of 8%. The common shares are currently selling in the market for $10 per share. At the current level of operations, the firm's EBIT is $5,000,000 and their tax rate is 40%. Oxford Inc. is planning a new project that costs $14,000,000. One proposal to raise the capital for this project: Proposal 1: Raise $14,000,000 by issuing new debt with a coupon rate of 8% What is the correct formula for EPS for Proposal 1? O EPS-(EBIT-960,000)(1-.40)/1,200,000 O EPS-(EBIT-2,080,000)(1-.40)/2,600,000 EPS=(EBIT-2,080,000)(1-.40)/1,200,000 O EPS=(EBIT- 1,120,000)(1-.40)/1,200,000 Page 6 of 31 Previous Page Next Page