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Please Help ASAP!! You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about
Please Help ASAP!!
You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commence operations. They are identical except for their use of debt (wa) and the interest rates on their debt- High uses more debt and thus must pay a higher interest rate. Both companies are small, so they are not subject to the interest deduction limitation. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh - EPSLow? Do not round your intermediate calculations Applicable to Both Firms Capital $3,000,000 EBIT $505,000 Tax rate 25% wa Shares Intrate Fimm High's Data 70% 90,000 12% w Shares Intrate Firm Low's Data 20% 240,000 10% $0.90 $0.57 $0.54 $0.75 $0.72 Step by Step Solution
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