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Champoux Hair Factory, Inc., has earnings before interest and taxes of $200,000. Annual interest amounts to $80,000, and annual depreciation is $80,000. Taxes are computed
Champoux Hair Factory, Inc., has earnings before interest and taxes of $200,000. Annual interest amounts to $80,000, and annual depreciation is $80,000. Taxes are computed at a 40 percent rate. Existing bond obligations require the payment of $40,000 per year into a sinking fund.
Champoux wishes to pay a $2 per-share dividend on the existing 20,000 shares. The firm
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