A firms shareholders believe that if its current debt 25, Finance Basics

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A firms shareholders believe that if its current debt 25

A firm's shareholders believe that if its current debt (2.5 million) were replaced by equity then earnings per share would increase. Assume the debt has a 10% interest rate, the tax rate is 45%, there are 400,000 shares outstanding that sell for 25.00 per share, and the current EPS is 1.85. Calculate the EPS with no debt. are the shareholders correct that an all equity firm would increase EPS

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Finance Basics: A firms shareholders believe that if its current debt 25

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