EPS

If the company issues 500 additional shares, the total number of shares will be 1,500. It issues $100,000 of debt at 9% interest, the annual interest expense will be $9,000. EPS FOR EQ = (EBIT * 0.6) / 1,500 EPS FOE DEBT = (EBIT - 9,000) * 0.6 / 1,000 Set the two EPS equations equal to each other and solve for EBIT: (EBIT * 0.6) / 1,500 = ((EBIT - 9,000) * 0.6) / 1,000 EBIT / 2,500 = (EBIT - 9,000) / 1,000 1,000 * EBIT = 1,500 * (EBIT - 9,000) 1,500 * EBIT - 1,000 * EBIT = 13,500,000 500 * EBIT = 13,500,000 EBIT = 27,000

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