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solve this Financial management question. Black Berry Farms and Pea Pod Farms are each able to generate EBIT of $232,000. The separate capital structures for
solve this Financial management question.
Black Berry Farms and Pea Pod Farms are each able to generate EBIT of $232,000. The separate capital structures for Black Berry and Pea Pod are presented below. Debt @ 8% Common stock Total Common shares EPS Black Berry Share price $1,500,000 1,400,000 $2,900,000 Debt @ 8% Common stock Share price 280,000 Common shares Total a. Compute EPS for both firms (assume a 40 percent tax rate). (Round the final answers to 2 decimal places.) Black Berry $ Pea Pod $ Black Berry $ Pea Pod b. Assuming a P/E ratio of 39 for each firm, what would be each firm's share price? (Round your intermediate calculations and final answers to 2 decimal places.) Black Berry $ $1,100,000 1,800,000 $2,900,000 Pea Pod $ 360,000 c. Assume the P/E ratio would be 36 for the riskier company in terms of heavy debt utilization in the capital structure and 47 for the less risky firm. What would the share price now be for each firm? (Round your intermediate calculations and final answers to 2 decimal places.) Pea Pod $
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