Question
As the CFO of Pelican Holdings, you must choose between the following two capital structures: Debt with a face value of $500 million and 40
As the CFO of Pelican Holdings, you must choose between the following two capital structures:
- Debt with a face value of $500 million and 40 million ordinary shares.
- Debt with a face value of $400 million and 44 million ordinary shares.
The debt pays interest of 5% p.a. with annual compounding, in both cases. Answer the following questions, given that the corporate tax rate is 30%.
What is Pelican's EPS under the first structure, if its EBIT is $90 million?
What is Pelican's EPS under the second structure, if its EBIT is $90 million?
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Intermediate Financial Management
Authors: Eugene F Brigham, Phillip R Daves
14th Edition
0357516664, 978-0357516669
