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Calculate the eps for eden

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Question 1: Eden ltd is an all-equity company with 100,000 shares outstanding priced at $50 per share. Eden pays out all of its after tax earnings in dividends, and earnings before interest and taxes (EBIT) is $1 million. Eden's tax rate is 40%. Assume Eden borrows $1 million at 10% and buys back its own stock at the current market price of $50 per share. As a result, Eden's cost of equity increase to 13% to reflect the new level of risk to the stockholders. Assume no growth. Calculate the EPS for Eden.

Reference no: EM132564135

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