Gulf Shores Inn is comparing two separate capital structures. The first structure consists of 350,000 shares of stock and no debt. The second structure consists of 312,000 shares of stock and $2.18 million of debt. What is the price per share of equity?

Multiple Choice

$60.10

$70.61

$74.14

$57.37

$65.56

Room and Board is considering two capital structures that have a break-even EBIT of $30,000. The all-equity capital structure would have 17,600 shares outstanding. The levered capital structure would have 13,000 shares of stock and $95,000 of debt. What is the interest rate on the debt? Ignore taxes.

Multiple Choice

7.41%

9.43%

7.84%

8.65%

8.25%

Ornaments, Incorporated, is an all-equity firm with a total market value of $575,000 and 24,000 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $81,500 if the economy is normal. If there is a recession, EBIT will be 10 percent lower, and if there is a boom, EBIT will be 20 percent higher. The tax rate is 21 percent. What is the EPS in a recession?

Multiple Choice

$2.65

$2.43

$2.21

$1.77

$2.41

Kline Construction is an all-equity firm that has projected perpetual EBIT of $372,000. The current cost of equity is 13.6 percent and the tax rate is 23 percent. The company is in the process of issuing $988,000 worth of perpetual bonds with an annual coupon rate of 5.6 percent at par. What is the value of the levered firm?

Multiple Choice

$2,333,416

$2,106,176

$1,853,922

$1,501,676

$1,953,885