Simone's Sweets is an all-equity firm that has 11,200 shares of stock outstanding at a market price of $22 per share. The firm's management has decided to issue $116,000 worth of debt at an interest rate of 9 percent. The funds will be used to repurchase shares of the outstanding stock. What are the earnings per share at the break-even EBIT?

Simone's Sweets is an all-equity firm that has 11,200 shares of stock outstanding at a market price of $22 per share. The firm's management has decided to issue $116,000 worth of debt at an interest rate of 9 percent. The funds will be used to repurchase shares of the outstanding stock. What are the earnings per share at the break-even EBIT?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

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