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QUESTION

Devon Ltd. common shares sell at $40 a share and their estimated price-to-earnings ratio (P/E) is 32.

Devon Ltd. common shares sell at $40 a share and their estimated price-to-earnings ratio (P/E) is 32. If Devon borrows funds to repurchase shares at its after-tax cost of debt of 5%, what is likely to occur to its EPS?

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