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:

• A)$2.00.
• B)$2.30.
• C)$2.50.
• D)$2.90.

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Definitions:

Ovule

The structure in seed plants that develops into a seed after fertilization.

Egg Cell

The female reproductive cell or gamete in many multicellular organisms, involved in sexual reproduction.

Petals

The often brightly colored parts of a flower, typically surrounding the reproductive organs, and serving to attract pollinators.

Pollinators

Animals that facilitate the transfer of pollen from the male structures of flowers to the female structures, enabling plants to reproduce.