Question
The board of directors of LuvMe Publishing Haus has commissioned a capital structure study. The company has a total assets of P50 million. It has
The board of directors of LuvMe Publishing Haus has commissioned a capital structure study. The company has a total assets of P50 million. It has earnings before interest and taxes (EBIT) of P9.0 million and is taxed at 25% The stock has a book value of P25 per share.
Additional information follows:
Percentage of Debt
0% 20% 30% 60%
Cost of debt
10.0% 10.9% 11.5% 16.5%
Required Rate of Return 0% 8.5% 9.5% 15.0%
Based on the above information using the debt ratio given, compute for the following:
1. Earnings per share (EPS)
2. Return on Equity (ROE)
3. Price per share
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