You Are a Buy-Side Analyst Researching the Gorilla Glass Co

Multiple Choice

You are a buy-side analyst researching the Gorilla Glass Co.Gorilla plans to borrow $11 million by issuing bonds with an annual coupon of 7% and a yield to maturity of 7%.Gorilla will use the borrowed money to repurchase shares on the open market at $40 per share.You have gathered the information,shown in the table,regarding the company prior to the repurchase.You estimate that EBIT for Year 1 will be the same as reported for Year 0.Assume that the money is borrowed and the repurchase is executed at the beginning of Year 1.
Gorilla Glass Co.
Dec 31,Year 0

What is the Year 1 EPS?

A) $2.00
B) $2.28
C) $2.80
D) $3.25
E) $3.52