2. Reconsider the Connecticut Computer Company of the previous problem assuming the firm has experienced some difficulties

Question:

2. Reconsider the Connecticut Computer Company of the previous problem assuming the firm has experienced some difficulties and its EBIT has fallen to $8,000.

a. Reconstruct the three-column chart assuming Connecticut’s EBIT remains at

$8,000.

b. Interpret the result in terms of stock price and the advisability of restructuring capital under these conditions.

c. Could these results have been predicted more easily? Use the ROCE concept to come to the same conclusion.

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