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Suppose General Motors (GM) is currently an all-equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently GM has
Suppose General Motors (GM) is currently an all-equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently GM has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets. What is GMs EPS if they choose not to change their capital structure?
A. None of the answers are correct B. $2.50 C. $2.00 D. $2.90 E. $2.30
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