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plz solve this question fast The Lopez-Portilio Company has $10 million in assets, 80 percent financed by debt and 20 percent financed by common stock.
plz solve this question fast
The Lopez-Portilio Company has $10 million in assets, 80 percent financed by debt and 20 percent financed by common stock. The interest rate on the debt is 15 percent, and the stock book value is $10 per share. President Lopez-Portlllo is considering two financing plans for an expansion to $15 milion in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost 18 percenti New stock will be sold at $10 per share. Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 40 percent. Q. If EBIT is 15 percent on total assets, compute eamings per share (EPS) before the expansion (current) and under the two aiternattves after expansion. (Round the final answers to 2 decimal places.) b. What is the DFL under each of the three plans? (Round the final answers to 2 decimal pleces.) c. Using the formula provided in the chapter, calculate the EBIT/EPS indifference point between Plan A and Plan B. (Enter the onswers in dollars not in militons.) EBIT $ d. If shares could be sold at $20 each due to increased expectations for the firm's sales and earnings, what impact would this have on. EPS for the two expansion altematives? Compute EPS for each. (Round the fnnal answers to 2 decimal ploces.) Step by Step Solution
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