Peidmont Painters Inc. is looking to raise $800,000 for new equipment to enhance the efficiency of...

Peidmont Painters Inc. is looking to raise $800,000 for new equipment to enhance the efficiency of its operations. The firm currently is capitalized with 200,000 shares of equity at a market price of $25 per share and also has $1,000,000 of debt with an interest rate of 6%. The company believes that with the new capital they could achieve an EBIT of $500,000. New debt would carry a 6% coupon. The company has 25% marginal tax rate. Using the EBIT which would make you indifferent between debt and equity, what will be the new EPS?

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