Reference no: EM133032211
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.
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