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s EPS and Debt-to-Equity Your corporation is currently all-equity financed with 400,000 shares of common stock selling for $39 a share. Currently your firm generates
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EPS and Debt-to-Equity Your corporation is currently all-equity financed with 400,000 shares of common stock selling for $39 a share. Currently your firm generates $5,000,000 in EBIT annually and has a 28% dividend payout ratio. Your firm's tax rate is 25%. a. What is your firm's current earnings per share and dividend per share? b. Your firm is considering financing an expansion with a bond issue of $7,500,000 that will pay 5.8% annually in interest. If the expansion increases your firm's EBIT to $7,000,000, what will be your firm's new debt-to-equity ratio, EPS, and dividend per share? c. If the expansion is instead financed with an issue of new stock, what will be your firm's new EPS and dividend per share? a. Calculate the firm's current earnings per share (EPS) and dividend per share (DPS) below: (Round to the nearest dollar except for the EPS and DPS wtStep by Step Solution
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