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    EBIT/EPS analysis

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    I need help with capital structure - here is an example...

    current proposed
    total assets 150 million 150 million
    debt 25 million 100 million
    equity 125 million 50 million
    common stock price $50.00 $50.00
    number of shares 2,500,000 1,000,000
    interest rate 12% 12%

    The company expects next years EBIT to be 20 million / 25% higher or lower.

    I just can not figure out which set of amounts to use to figure this out. Thank you for your advice.

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    Solution Summary

    The solution explains how to do an EBIT/EPS analysis and assess the impact on capital structure.