Figure 12.1

market. B) The tremendous growth of the sub-prime lending market C) The collapse of the US. housing market. D) All of the above contributed to the Great Recession. Figure 12.1: Selected information for Crane Manufacturing Inc. ALL EQUITY 500,000 S0 300,000 $100,000 Interest ex Tax rate = 30% 11) CcGiven the information in Figure 12.1, what is the break-even EBIT-EPS for Crane Manufacturing Inc.? A) EBIT = $350,000 and EPS = $0.45 C) EBIT = $100,000 and EPS = $0.15 B) EBIT = $250,000 and EPS-S0.35 D) EBIT-$400,000 and EPS = $0.65 12) Pinnacle Financial Management projects that earnings per share for Valley Imports Inc. will increase from the current $1.75 per share to $2.00 next year. If Pinnacle recommends a P/E ratio of 12.5 for Valley Imports, what is the recommended forward looking price for the firm? A) $6.25 per share C) $25.00 per share B) $21.88 per share D) S23.44 per share 13) Which of the following statements is generally NOT true? A) Short-term debt usually carries lower interest rates than long-term debt with comparable default risk B) A firm should attempt to match the nature of a project with the duration of the financing it needs C) Issuing variable rate debt increases financial uncertainty relative to issuing fixed-rate debt. D) All of the above statements are true. 14) The interest coverage ratio is equal to: A) (debt + equity)/EBII. C) EBIT interest. B) interest/EBIT D) EBIT/interest. 15) The benefit of the_ approach to firm valuation is that it allows us to segregate the value of a firm if it is all-equity, and the value of the tax benefits of debt. A) net present value C) internal rate of return B) capital structure D) adjusted present value