Earnings per share at breakevenThe 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.