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Company issues the debt and ebit

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ABC Co is currently 100% equity financed, has 25,000 shares outstanding at a price of $30 a share, and produces an annual EBIT of $150,000. The firm is considering issuing $240,000 of debt and repurchasing shares. The cost of debt is 12%. Ignore taxes. By how much will EPS change if the company issues the debt and EBIT remains constant?

Reference no: EM132638153

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