You are the CFO of an all-equity financed firm. Now, you are evaluating a capital restructuring plan
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Question:
You are the CFO of an all-equity financed firm. Now, you are evaluating a capital restructuring
plan to issue some debt and use the proceeds to repurchase some shares. How will the earnings per
share (EPS) change with respective to the leverage change? In what circumstances, increasing
leverage will be beneficial for shareholders? In what circumstances, increasing leverage will hurt
shareholders?
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