### Computation of earnings per share

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##### Reference no: EM1327580

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.

Nielson's EPS if they change their capital structure is closest to:

A. \$2.90
B. \$2.30
C. \$2.50
D. \$2.00

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