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Top management of Crane company is considering two alternative capital structures for 2 0 2 7 . The first ( the no debt structure
Top management of Crane company is considering two alternative capital structures for The first the no debt" structure
would be to have $ in assets and $ in stockholders' equity, with shares outstanding the entire year. This is
the structure the company had on December Alternatively, on January the company could issue $ in debt
at interest the "with debt" structure and immediately use the proceeds to repurchase shares of stock for $ The
expected amount of net income ignoring taxes prior to any interest costs, is $ for
Assume the company pays dividends on common stock equal to its net income each year. Also, assume the accrued interest on the
debt was paid at December and the company has no other debt outstanding at yearend.
Also, assume the company has $ in assets at both the beginning and the end of
a
Your answer is correct.
Compute the company's net income and earnings per share under both structures. Ignore income taxes in your computations.
Round earnings per share to decimal places, eg
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Attempts: unlimited
b
Compute the company's return on common stockholders' equity and return on assets under both structures. Round answers to
decimal places, eg
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