Answer to Question #67679 in Accounting for virlesh
Option 1: The Company would borrow $3.5 million at 8% interest rate and use the proceeds to engage in share repurchase program for 3.5 million shares at the current market price of $1.
Option 2: Company can raise $3.5 million by issuing new shares at the current market price of $1.
a) What is the current EPS for shareholders? (5 marks)
b) What will be the EPS after the change in capital structure under option 1 and option 2? Hint: show full working from EBIT to Net Profit (12 marks)
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!