Consider a firm with an EBITDA of $ 1 , 1 0 0 , 0 0 0

Fantastic news! We've Found the answer you've been seeking!

Question:

Consider a firm with an EBITDA of $

1, 100, 000

and an EBIT of $

1, 000, 000 .

The firm finances its assets with $

4, 640, 000

debt

(

costing

8.4

percent, all of which is tax deductible

)

and

214, 000

shares of stock selling at $

12

per share. To reduce risk associated with this financial leverage, the firm is considering reducing its debt by $

2, 640, 000

by selling additional shares of stock. The firm

s tax rate is

21

percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $

1, 000, 000 .

Calculate the EPS before and after the change in capital structure and indicate changes in EPS.

Posted Date: May 11, 2024 04:10 AM

See More Questions

Antibiotic resistance occurs when disease-causing microbes become resistant to antibiotic drug therapy. Because this resistance is typically genetic and transferred to the next generation of...
Consider a firm with an EBITDA of $1,100,000 and an EBIT of $1,000,000. The firm finances its assets with $4,500,000 debt (costing 8 percent, all of which is tax deductible) and 200,000 shares of...
Consider a firm with an EBITDA of $13,00,000 and an EBIT of $10,500,000. The firm finances its assets with $50,000,000 debt (costing 6.5 percent) and 10,000,000 shares of stock selling at $10.00 per...
The last two decades have taught us that when it comes to financial deregulation, it is possible to have too much of a good thing too quickly. Financial deregulation has often taken place...
Visit the website for Federation of Tax Administrators (www.taxadmin.org) and use the Links button to go to the Illinois Department of Revenue website. Locate a copy of the Corporate Income and...
The triangular plate ABC is supported by ball-and-socket joints at B and D and is held in the position shown by cables AE and CF. If the force exerted by cable AE at A is 55 N, determine the moment...
Stars Ltds account balances at 31 December 20x5 are as follows: Required 1 Prepare a profit and loss statement for the year ending 31 December 20x5. 2 Prepare a classified balance sheet as at 31...
Global Green Books Publishing produces customized eBooks for a local college. It has just received an order for a new eBook on Strategic Human Resource Management in a Global Context from a senior...
Sales of Plant Assets 10.26 Company S purchases a machine for $10,000 on January 1, 19X1. The machine is expected to have a 10-year life and no salvage value. Prepare the journal entry for each of...
Time value Personal Finance Problem You can deposit $13,000 into an account paying 7% annual interest either today or exactly 5 years from today. How much better off will you be at the end of 25...
Let A and B be 4 x 4 matrices with det(A) = 4 and det(B) = -2. Find the value of (a) det ((3A)(2B)-) (b) det (adj(A)) (c) det (ABAT)
explain each with as much detail as you can 1) Define the following terms: - Union Steward - Bargaining Unit - Grievance Procedure - Authorization Cards - Exclusive Representation - National Labor...
What is the relationship between job satisfaction and organizational commitment, and are there specific job satisfaction factors that are particularly influential in fostering commitment ?
Suppose that your implementation of a particular algorithm appears in Java as follows: for (int pass = 100; pass >= 5; pass--) { for (int index = 1; index < 2n; index++) { for (int count = 1000;...
Boxwood Company sells blankets for $38 each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Boxwood uses a perpetual...
Question 1 Mrs. Jane Smith has provided you with the following information with respect to her 2018 taxation year. She has asked you to review the information and provide her with an approximation of...
Which of the following raises the credibility of areport? Which of the following raises the credibility of a report? Multiple Choice avoiding predictions avoiding the use of cause-effect statements...
Show how the share price of a very profitable company which invests at a rate of return that is higher than the required rate of return can still drop.
What is a conglomerate discount? How can it be avoided?
A company that is close to insolvency carries out a capital increase. Is this a signal? Why? What criteria can you identify as being necessary for a decision to be described as a signal?

Consider a firm with an EBITDA of $ 1 , 1 0 0 , 0 0 0

Question:

Expert Answer:

To calculate the EPS Earnings Per Share before and after the change in capital structure we need to ... View the full answer

Students also viewed these finance questions