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Use the Following Information to Answer the Question(s)below

question 29

Multiple Choice

Use the following information to answer the question(s) below.
Nielson Motors is currently an all-equity financed firm.It expects to generate EBIT of $20 million over the next year.Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share.Nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares.Assume perfect capital markets.
-Nielson's EPS if they change their capital structure is closest to:

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Definitions:

Net Present Value

Net Present Value (NPV) is a financial measurement that calculates the current value of expected future cash flows from an investment, adjusted for time and interest.

Average Accounting Return

A financial ratio that calculates the average annual income from an investment compared to its initial cost.

Required Rate Of Return

The minimum return an investor expects to receive on an investment, taking into account its risk level.

Cash Flows

The net amount of cash and cash-equivalents moving into and out of a business.