Question
Under the current capital structure, Olimp Inc. has no debt and a total market value of $15 Million. The current stock price outstanding is $25
Under the current capital structure, Olimp Inc. has no debt and a total market value
of $15 Million. The current stock price outstanding is $25 per share.
The firm is proposing a capital restructuring. Under the proposed capital structure, Olimp Inc.
is considering a $6 Million debt issue. The proceeds will be used to repurchase part of the
outstanding stock. The price per share will not change and the interest rate of debt is
10%.There are no taxes. EBIT is expected to be $2.5 million, but could be
as high as $3.5 million if an economic expansion occurs, or as low as
$2 million if a recession occurs. All values are market values.
14 What is EPS during an expansion forthe proposedcapital structure?
A)$7.56
B)$8.06
C)$8.56
D)$9.26
E)$10.86
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