Earnings per share at breakeven
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The Quilt Shoppe is an all equity firm that has 2,500 shares of stock outstanding at a market price of $20 a share. Company management has decided to issue $10,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 8.5 percent. What are the earnings per share at the break-even level of earnings before interest and taxes? Ignore taxes.
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Solution Summary
A step-by-step solution is given that explains how to calculate the earnings per share at the break-even level of earnings before interest and taxes. Details on problem using Excel is also explained.
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