7) The Canterbury Coach Corporation has EBIT of $3.62 million and total capital of $20 million, which is 15% debt. There are 425000 shares of stock outstanding which sell at book value. The firm pays 14% interest on its debt and is subject to a combined state and federal tax rate of 39%. Canterbury is contemplating a capital restructuring to either 30%, 45%, 60% or 75% debt.

1. A) Calculate the Net Income, ROE, EPS and the DFL at the current and proposed structures, and display your results in a systematic table. Filling in income statement and balance sheet work in thousand dollars. For example, an answer of $1.2 thousand should be entered as 1.2, not 1200. Round ROE, EPS, DFL to two decimal places. Enter the number of shares in whole numbers, and not in thousands. Enter all amounts as positive numbers.

15% 30% 45% 60% 75%

debt debt debt debt debt

Ebit 3260 3260 3260 3260 3260

Interest ____ _____ _____ _______ _____

EBT $ $ $ $ $

Tax ________ _______ _______ _______ _______

Net Income $ $ $ $ $

BALANCE SHEET ($000)

Debt $ $ $ $ $

Equity ___ ____ ____ ____ ___

Capital $ $ $ $ $

Shares ______ _____ _______ _____ _______

Book Value per share $_______ $ ______ $ _______ $ ______ $ _______

ROE % % % % %

EPS $ $ $ $ $

DFL ___ ___ ___ ___ ____

PLEASE ONLY ANSWER IN CORRECT ARRANGMENT