The Megalops Company has no debt outstanding and its financial position is given by the following data: Expected EBIT $800,000 Growth rate in EBIT, 0% 8 Cost of equity,r 8% Shares outstanding, 250,000 n Tax rate 125% 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? $4.21 Correct Answer $2.89 5481 You Answered $2.53