Calculate next year earnings per share

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Question - As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011:

Last year's EBIT, 2011 $175.0 million

Expected EBIT 2012 $189.8 million

Current portion of existing long-term debt, due 2012 $34 million

Interest due 2012 on existing debt $36 million

Tax rate 35%

Common stock price today, per share $50

Common shares outstanding 20 million

Dividends per share $2

Nile has an attractive investment opportunity, and to finance it, must decide whether to issue $100 million in new debt or new equity.

Required - Calculate next year's earnings per share assuming Nile raises the $100 million of new debt.

Reference no: EM133032211

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