\Bavarian Brew EPS Bavarian Brew, an Unlevered Firm, Has a Perpetual EBIT of Perpetual

question 80

Multiple Choice

\Bavarian Brew EPS
Bavarian Brew, an unlevered firm, has a perpetual EBIT of $500,000. The required return on assets for the firm's assets is 10%. The company has 250,000 shares outstanding, trading at $20 per share. The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase 50,000 shares of outstanding stock.
-What are Bavarian Brew's earnings per share before the restructuring? Assume no corporate taxes.

• A) $2.50
• B) $2.25
• C) $2.00
• D) $1.75

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