McMillin Industries Is Currently 100% Equity fiNanced, Has 25,000 Shares

question 314

Multiple Choice

McMillin Industries 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 $300,000 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?

• A) $.72
• B) $.76
• C) $1.54
• D) $1.60
• E) $1.72

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Definitions:

Land Expansion

The process of a country or state increasing its territory through annexation, purchase, conquest, or exploration.

Western Advancement

The expansion and development of territories and communities in the western part of the United States, particularly during the 19th century.

Indians

Refers to the indigenous peoples of the Americas, also known as Native Americans, recognized for their diverse cultures, languages, and histories prior to European colonization.