The Megalops Company has no debt outstanding and its financial position is given by the...
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The Megalops Company has no debt outstanding and its financial position is given by the following data: 8% Expected EBIT $800,000 Growth rate in EBIT,& 0% Cost of equity, Shares outstanding, n 250,000 Tax rate 25% Megalops plans to sell bonds and repurchase stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity will increase to 12%. Bonds can be sold at a cost of 7%. Based on the new capital structure what is the new earnings per share? O $4.21 O $2.89 O $4.81 O $2.53
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