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AAA Company is financed entirely by common stock that is priced to offer a 15 percent expected return. The common stock price is USD 40 per share. The earnings per share (EPS) is expected to be USD 6. If the company repurchases 25 percent of the common stock and substitutes an equal value of debt yielding 6 percent, what is the expected value of earnings per share after refinancing? (Ignore taxes.)
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