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Calculate the eps after the change in capital structure

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Reference no: EM132947114

Question - Consider a firm with an EBIT of P552,000. The firm finances its assets with P1,020,000 debt (costing 5.7 percent) and 202,000 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by P900,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at P552,000. Calculate the EPS after the change in capital structure and indicate changes in EPS.

Reference no: EM132947114

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