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A company with EBIT of $5,000,000 is considering two financing alternatives. The first alternative would have $23 million of bonds at 7% interest and 900,000
A company with EBIT of $5,000,000 is considering two financing alternatives. The first alternative would have $23 million of bonds at 7% interest and 900,000 common shares outstanding, whereas the second would have $45 million of bonds at 7% interest and only 700,000 shares outstanding. The company is in the 35% tax bracket. | ||||||
Required: | ||||||
B. Construct the bottom half of the income statement (including EPS) for each alternative if EBIT increases by 25%. | ||||||
Your answers to this open-ended assignment should be placed in the space below this line. | ||||||
B | Alternative #! | Alternative #2 | ||||
EBIT | ||||||
Interest | ||||||
Earnings before taxes | ||||||
Income tax | ||||||
Net income | ||||||
Number of shares outstanding | ||||||
Earnings per share |
Note: Please put your answers only in the section below the Bold Red sentence at the end of the Required section below.
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