What Happens to an All-Equity Firm's EPS When $1 Million

question 59

Multiple Choice

What happens to an all-equity firm's EPS when $1 million of 20% debt is issued and proceeds used to repurchase two-thirds of the stock if operating income equals $1.5 million and EPS were $2 when the firm was all equity financed? Ignore taxes.(Use values in dollar.)

• A)EPS increase to $2.60
• B)EPS increase to $3.00
• C)EPS increase to $4.80
• D)EPS increase to $5.20

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Definitions:

Work Progress

The advancement or development of tasks, projects, or objectives towards completion over time.

Performance

The manner in which an individual or organization executes tasks or activities, usually measured against a known standard or expectation.

Work Unit Activities

Tasks and responsibilities assigned to a specific team or department within an organization, contributing to its overall objectives.

Recognizing

The act of acknowledging and appreciating the achievements or contributions of individuals, typically used as a motivational tool in leadership.