Equities Question example, interest, increase, decrease, following

hinsafdar

Hi All,

The following has been bugging me; why does a decrease in the tax rate increase EPS when a decrease in the tax rate adds to the after tax cost of debt.

For example: 10% interest (1-0.50)

Tax rate goes down so 10 % interest (1-0.40)

Est. ESP = (Sales * EBITDA margin/% ) - deprec. - int (1-Taxrate)

So ESP would be less not more - right???? Put me out of my misery!