McMillin Industries Is Currently 100% Equity Financed, Has 25,000 Shares

Multiple Choice

McMillin Industries is currently 100% equity financed, has 25,000 shares outstanding at a price of $30 a share, and produces an annual EBIT of $150,000. The firm is considering issuing $300,000 of debt and repurchasing shares. The cost of debt is 12%. Ignore taxes. By how much will EPS change if the company issues the debt and EBIT remains constant?

A) $.72
B) $.76
C) $1.54
D) $1.60
E) $1.72