Question
Top Up is a levered firm with assets valued at $300,000, has $25,000 of debt issued at 7% interest, and 2,000 shares of stock outstanding.
Top Up is a levered firm with assets valued at $300,000, has $25,000 of debt issued at 7% interest, and 2,000 shares of stock outstanding. Suppose that corporate profits are subject to a tax rate of 25%. Which of the following comes closest to the earnings before interest and tax (EBIT) of Top Up if its earnings per share (EPS) is $0.50?
| a. | $1,226 | |
| b. | $1,753 | |
| c. | $1,508 | |
| d. | $3,083 | |
| e. | $3,750 |
Bryant Industries is a firm with $850 million in assets and no debt financing. The shareholders of Bryant have convinced the management to take advantage of the tax deductibility of debt interest payments by issuing $100 million in new debt at 9% interest, and using the $100 million proceeds from the debt to repurchases that same amount of equity. The corporate tax rate is 28%. What is the new value of Bryant after the debt issue?
| a. | $850 million | |
| b. | $912 million | |
| c. | $878 million | |
| d. | $750 million | |
| e. $712 million
|
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Currency Strategy The Practitioners Guide To Currency Investing Hedging And Forecasting
Authors: Callum Henderson
2nd Edition
0470027592, 978-0470027592
