Answered step by step
Verified Expert Solution
Question
1 Approved Answer
As a result of the analysis of the two financing methods A and B considered by Hanyang Company, the capital raising indifference was calculated as
As a result of the analysis of the two financing methods A and B considered by Hanyang Company, the capital raising indifference was calculated as KRW 500,000; Prop A is a method of not using any additional capital, and Prop B is a method of using 80% of other capital of 10% interest cost. Which of the following explanations is not appropriate?
1. If the operating profit is less than 500,000 won, method B is advantageous to shareholders.
2.When the 0 operating profit is 500,000 won, the EPS of Proposal A and Proposal B are the same.
3. If the operating profit is 500,000 won, the two methods are indiscriminate.
4. Proposition B is more likely to fluctuate in shareholder profits.
5. Even if there is no tax, the net profit per share varies depending on the two methods.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started