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Question
Two companies, Jefferson and Jackson, are virtually identical in all aspects of their operations except that the two companies differ in their capital structures, as shown below:| Jefferson | Jackson | |
| Debt (10%) | $200 million | $100 million |
| Common equity | $300 million | $400 million |
| No. shares outstanding | 15 million | 20 million |
Both companies have $500 million in total assets and both have a 40% marginal tax rate. What is the EPS for Jefferson at an EBIT level of $50 million?
a. $-1.20
b. $ 1.20
c. $ 2.20
d. $ 3.33
Answer
This answer is hidden. It contains 75 characters.
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