A Firm Has a Current Capital Structure Consisting of $400,000

question 155

Multiple Choice

A firm has a current capital structure consisting of $400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary income. If the EBIT is expected to be $200,000, the firm's earnings per share will be ________.

• A) $2.40
• B) $3.04
• C) $7.04
• D) $1.82

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