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The Connecticut Computer Company has the selected financial results shown below. 15% Debt 40% Debt 75% Debt Debt $22,500 Equity 127,500 Total Capital $150,000 Shares@
The Connecticut Computer Company has the selected financial results shown below.
15% Debt | 40% Debt | 75% Debt | |
Debt | $22,500 | ||
Equity | 127,500 | ||
Total Capital | $150,000 | ||
Shares@ $5 | 25,500 | ||
EBIT | $15,000 | ||
Interest (10%) | 2,250 | ||
EBT | $12,750 | ||
Tax (40%) | 5,100 | ||
Net Income | $7,650 | ||
ROE | |||
EPS |
The company is considering a capital restructuring to increase leverage from its present level of 15% of capital.
Assume Connecticut Computer Company is earning an EBIT of $15,000 the chart showing the implication of adding more leverage. Round ROE to one decimal place. Round EPS to two decimal places. Enter all amounts as positive numbers.
15% Debt | 40% Debt | 75% Debt | |
Debt | $22,500 | $ | $ |
Equity | 127,500 | ||
Total Capital | $150,000 | $ | $ |
Shares@ $5 | 25,500 | ||
EBIT | $15,000 | ||
Interest (10%) | 2,250 | ||
EBT | $12,750 | $ | $ |
Tax (40%) | 5,100 | ||
Net Income | $7,650 | $ | $ |
ROE | % | % | % |
EPS | $ | $ | $ |
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