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What is EPS Analysis for Debt Recapitalization about?

Money, Inc. is considering issuing $99,000 in debt at 8% interest to repurchase shares. Under normal economic conditions, earnings before interest and taxes (EBIT) are projected to be $21,000. If the economy expands, EBIT will be 25% higher, and if there is a recession, EBIT will be 40% lower. Issuing the debt would decrease earnings per share (EPS) more in a recession compared to normal or expansion conditions. The percentage decrease in EPS in a recession would be around 64% with debt, compared to around

Author

Nipun

Language

EN