The Megalops Company has no debt outstanding and its financial position is given by the following data: Expected EBIT $800,000 Growth rate in 0% EBIT, g Cost of equity, r 9% Shares 150,000 outstanding, n Tax rate 25% Megalops plans to sell bonds and repurchase stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity will increase to 12%. Bonds can be sold at a cost of 7%. Based on the new capital structure what is the new earnings per share? $4.81 $4.21 $2.53 O $2.89 JCB, Inc is considering a change in its capital structure. JCB currently has $50 million in debt carrying a rate of 9% and its stock price is $40 per share with 4 million shares outstanding. JCB is a zero-growth firm and pays out all of its earnings as dividends. The firm's EBIT is $16 million and it faces a 25% tax rate. The market risk premium is 6% and the risk-free rate is 4%. JCB is considering increasing its debt level to a capital structure with 40% debt, based on market values, and repurchasing shares with the proceeds. JCB will have to retire the old debt in order to issue new debt and the rate on the new debt will be 10%. JCB currently has a beta of 1.0. What will be the total value of the firm with 40% debt? $132,930,514 $127.978,216 $122,766,123 $124,386,252