McMillin Industries is currently 100% equity ﬁnanced, has 25,000 shares outstanding at a price of $30 a share, and produces an annual EBIT of $150,000. The ﬁrm is considering issuing $300,000 of
Debt and repurchasing shares. The cost of debt is 12%. Ignore taxes. By how much will EPS change
If the company issues the debt and EBIT remains constant?
A) $.72
B) $.76
C) $1.54
D) $1.60
E) $1.72

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The Answer of McMillin Industries is currently 100% equity ﬁnanced, has 25,000 shares outstanding at a price of $30 a share, and produces an annual EBIT of $150,000. The ﬁrm is considering issuing $300,000 of
Debt and repurchasing shares. The cost of debt is 12%. Ignore taxes. By how much will EPS change
If the company issues the debt and EBIT remains constant?
A) $.72
B) $.76
C) $1.54
D) $1.60
E) $1.72

McMillin Industries Is Currently 100% Equity ﬁNanced, Has 25,000 Shares