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Use the following information to answer the question(s) below. Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20
Use the following information to answer the question(s) below. Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson 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. A) Nielson's EPS if they choose not to change their capital structure is closest to: B) If Nielson repurchases shares at the current market price, how many shares will be repurchased? A) A. $2.90 B. $2.50 C. $2.30 D. $2.00 B) A. 0.4 Million B. 2.5 Million C. 4 Million D. 25 Million
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