Oxford Publishing initially has no debt outstanding and a total market value of $3,085,000. Earnings before interest and taxes (EBIT) are $658,000. There are currently 219,000 shares outstanding.
Oxford is considering issuing $317,000 of debt with a 4% coupon rate (i.e., pre-tax cost of debt) and using the proceeds to buy back shares of stock.
What is earnings per share (EPS) after the share buyback? Ignore taxes for this problem (i.e. tax rate = 0%).