Calculate earnings per share in each state of the economy

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Reference no: EM131194828

Assume no taxes no bankruptcy costs. Company U has no debt outstanding and the market value is $200000. Earnings before interest and taxes (EBIT) are expected to be $25000 if economic conditions are normal and $40000 if expansion occurs. Currently Company U has 10000 shares outstanding.

Calculate Earnings per share (EPS) in each state of the economy.

Company U is considering a $90000 debt issue with a 6% interest rate (the proceeds are used to buy back the shares). What will the EPS be after the debt issue?

Reference no: EM131194828

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