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EPS, Debt-to-Equity, Breakeven point LexMart maintains a debt-to-equity ratio of 1.0 regardless of whether the firm experiences expansion or contraction. At the present time,

EPS, Debt-to-Equity, Breakeven point LexMart maintains a debt-to-equity ratio of 1.0 regardless of whether the firm experiences expansion or contraction. At the present time, LexMart has $1,000 par value bonds outstanding that pay 7% annual interest. The firm also has 2.6 million shares of common stock outstanding that sells for $22 per share. a. Based on LexMart's current annual NOP of $21,000,000 and its corporate tax rate of 20%, what is its EPS? b. If LexMart would like to finance a $60 million expansion while maintaining it's current debt-to-equity ratio of 1.0, how many bonds at $1,000 per bond and shares of stock will it have to sell to pay for the expansion? c. After the expansion, what level of annual NOP will LexMart have to generate to maintain its current level of EPS? a. LexMart's current EPS is $ (Round to three decimal places.) ...

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SOLUTION a To calculate EPS we first need LexMarts net income With an NOP of 21 million and a tax ra... blur-text-image
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