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Pulp Paper Company and Holt Paper Company are each able to generate EBIT of $150,00. The separate capital structures for Pulp and Holt are presented
Pulp Paper Company and Holt Paper Company are each able to generate EBIT of $150,00. The separate capital structures for Pulp and Holt are presented below. a. Compute EPS for both firms (assume a 40 percent tax rate) b. Assuming a P/E ratio of 25 for each firm, what would be each firm's share price? c. Assume the P/E ratio would be 20 for the riskier company in terms of heavy debt utilization in the capital structure and 31 for the less risky firm. What would the share price now be for each firm? d. Not available in Connect
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