Question
estions . Your prind plans to start a new company to make a new type of cat litter. Her father will finance the operation,
estions . Your prind plans to start a new company to make a new type of cat litter. Her father will finance the operation, but she will have to pay him back. You are beping her, and the issue now is how to finance the company, with equity only or with a mix of debt and equity. The price per unit will be $10.00 regardless of how the firm is financed. The expected fixed and variable operating costs, along with other information, are shown below. How much higher or lower will the firm's expected EPS be if it uses some debt rather than only equity, Le, what is EPS-EPSy? Do not round your intermediate calculations. Expected unit sales 0% Debt U 250,000 60% Debt L 250,000 Price per unit Fixed costs Variable cost/unit Required investment Shares issued at $10/share %Debt Debt S Equity, S Interest rate Tax rate O$3.41 b$1.06 $1.43 $10.00 $10.00 $1,000,000 $1,000,000 $3.50 $3.50 $2,750,000 $2,750,000 275,000 110,000 0.00% 60.00% $0 $1,650,000 $2,750,000 NA $1,100,000 10.00% 25.00% 25.00%
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