Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider this case: Liukin Holdings Inc. is considering a project that will require $300,000 in assets. The project is expected to produce an EBIT (earnings

image text in transcribed

Consider this case: Liukin Holdings Inc. is considering a project that will require $300,000 in assets. The project is expected to produce an EBIT (earnings before interest and taxes) of $55,000. The project will be financed with 100% equity. There will be 30,000 shares of common equity outstanding. The company faces a tax rate of 35%. Using the preceding information, what will be Liukin Holdings Inc.?s return on equity (ROE) for this project? 11.92% 14.30% 11.32% 12.52% Liukin Holdings Inc.?s earnings per share (EPS) will be if it finances this project with 100% equity. Liukin Holdings Inc.?s CFO is also considering financing this project with 50% debt and 50% equity. The interest rate on the company?s debt will be 10%. Because the company will finance only 50% of the project with equity, it will have only 15,000 shares outstanding. What will be the ROE on this project if the company decides to finance the project with 50% debt and 50% equity? Q 17.33% Q 14.73% Q 18.20% Q 19.06% Liukin Holdings Inc.?s EPS will be if it finances this project with 50% equity and 50% debt. Consider this case: Liukin Holdings Inc. is considering a project that will require $300,000 in assets. The project is expected to produce an EBIT (earnings before interest and taxes) of $55,000. The project will be financed with 100% equity. There will be 30,000 shares of common equity outstanding. The company faces a tax rate of 35%. Using the preceding information, what will be Liukin Holdings Inc.?s return on equity (ROE) for this project? 11.92% 14.30% 11.32% 12.52% Liukin Holdings Inc.?s earnings per share (EPS) will be if it finances this project with 100% equity. Liukin Holdings Inc.?s CFO is also considering financing this project with 50% debt and 50% equity. The interest rate on the company?s debt will be 10%. Because the company will finance only 50% of the project with equity, it will have only 15,000 shares outstanding. What will be the ROE on this project if the company decides to finance the project with 50% debt and 50% equity? Q 17.33% Q 14.73% Q 18.20% Q 19.06% Liukin Holdings Inc.?s EPS will be if it finances this project with 50% equity and 50% debt

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

An Introduction To Socio-Finance

Authors: Jørgen Vitting Andersen, Andrzej Nowak

2013th Edition

3642419437, 978-3642419430

More Books

Students also viewed these Finance questions