Answer: $10.2

## Explanation **Step 1: Calculate current EPS** Current EPS = Earnings / Shares outstanding = $45,000,000 / 4,500,000 = $10.00 **Step 2: Calculate interest expense on new debt** Interest expense = $25,000,000 × 7% = $1,750,000 **Step 3: Calculate new earnings after interest expense** New earnings = $45,000,000 - $1,750,000 = $43,250,000 **Step 4: Calculate new shares outstanding after repurchase** New shares = 4,500,000 - 250,000 = 4,250,000 **Step 5: Calculate new EPS** New EPS = $43,250,000 / 4,250,000 = $10.176 ≈ $10.2 **Verification**: - Earnings yield = $10 / $100 = 10% - After-tax cost of debt = 7% - Since 10% > 7%, EPS should increase (from $10.00 to $10.18) Therefore, the EPS after the share repurchase will be closest to **$10.2**.

Author: LeetQuiz Editorial Team