0mFn..anumrend win 1730 srwes oistan ing and an EBIT of 700 Copone earngs ao ta-
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Question
0mFn..anumrend win 1730 srwes oistan ing and an EBIT of 700 Copone earngs ao ta-ed at a rate of 31%. Caloale EPS for Oak Farms Supoose that Oak Farm makes a decision to partion (aplit ts assets into debt and equity The em issues $1350 of det at a cost of 7.70% and uses these funds to reduce the amount of equity on its books. The partition dos not change the EBIT or hex but does reduce the number of shares outstanding to 1000 Compute Oak Farms EPS ater the partition S Note Your answer shouid be in dolars and centsExplanation / Answer
EPS = (EBIT - Interest) x (1 - tax) / No. of shares
= (700 - 0) x (1 - 31%) / 1750
= $0.28
With debt,
EPS = (700 - 1350 x 7.7%) x (1 - 31%) / 1000
= $0.41
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