Consider a firm with an EBIT of $ The firm finances its assets with $ debt costing
percent and is all tax deductible and shares of stock selling at $ per share. To
reduce the firms risk associated with this financial leverage, the firm is considering reducing its debt
by $ by selling an additional shares of stock. The firms tax rate is percent. The
change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at
$Consider a firm with an EBIT of $ The firm finances its assets with $ debt costing
percent and is all tax deductible and shares of stock selling at $ per share. To
reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt
by $ by selling an additional shares of stock. The firm's tax rate is percent. The
change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at
$
Calculate the change in the firm's EPS from this change in capital structure.
Note: Do not round intermediate calculations and round your final answers to decimal
places.
