Homework Answers
| a) | ||||||
| EBIT | TA | EBIT/TA | LENOW EPS | HALL EPS | RELATIONSHIP | EPS CALCULATION: |
| 20000 | 300000 | 0.07 | 0.5 | 0 | as the EBIT rises, | EBIT - INTEREST / NUMBER OF SHARES |
| 30000 | 300000 | 0.1 | 1 | 1 | the EPS of Hall increases at | |
| 120000 | 300000 | 0.4 | 5.5 | 10 | higher rate | |
| b1) When the firm's have equal EPS, the EBIT/TA is 10%. | ||||||
| b2) The cost of debt is 10% for both the firms | ||||||
| b3) sorry, have not got the statement | ||||||
| c) Break even level for EBIT when cost of debt went to 12%. | ||||||
| LENOW | HALL | |||||
| EBIT - 12000 / 20000 | = | EBIT - 24000 /10000 | ||||
| EBIT - 12000 | = | (EBIT - 24000)*2 | ||||
| BEL of EBIT = 48000-12000 = $36000 | ||||||
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IVE HOMEWORK Saved Help Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here Lenow Hall Debt @ 10% Common stock, $10 par Total Common shares $200,000 100,000 $300,000 10,000 $100,000 Debt@ 10% 200,000 Common stock, $10 par S300,000 Total 20,000 Common shares a. Complete the following table given earnings before interest and taxes of $20,000, $30,000, and $120,000. Assume the tax rate is 30 percent. (Round your...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate cap...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Debt @ 10% Common stock, $10 par Total Common shares Hall $140,000 Debt @ 10% 280,000 Common stock, $10 par $420,000 Total 28,000 Common shares $ 280,000 140,000 $420,000 14,000 a. Complete the following table given earnings before interest and taxes of $18,000, $42,000, and $59,000. Assume the tax rate is 30 percent....
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Hall Debt @ 8% $ 300,000 Debt @ 8% $ 600,000 Common stock, $10 par 600,000 Common stock, $10 par 300,000 Total $ 900,000 Total $ 900,000 Common shares 60,000 Common shares 30,000 a. Complete the following table given earnings before interest and taxes of $34,000, $72,000, and $89,000. Assume the tax rate...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Hall Debt @ 8% $ 270,000 Debt @ 8% $ 540,000 Common stock, $10 par 540,000 Common stock, $10 par 270,000 Total $ 810,000 Total $ 810,000 Common shares 54,000 Common shares 27,000 a. Complete the following table given earnings before interest and taxes of $31,000, $64,800, and $81,000. Assume the tax rate...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in
the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 8%
$
150,000
Debt @ 8%
$
300,000
Common stock, $10 par
300,000
Common stock, $10 par
150,000
Total
$
450,000
Total
$
450,000
Common shares
30,000
Common shares
15,000
a. Complete the following table given earnings
before interest and taxes of $19,000, $36,000, and $60,000. Assume
the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Hall Debt @ 10% $ 140,000 Debt @ 10% $ 280,000 Common stock, $10 par 280,000 Common stock, $10 par 140,000 Total $ 420,000 Total $ 420,000 Common shares 28,000 Common shares 14,000 a. Complete the following table given earnings before interest and taxes of $18,000, $42,000, and $59,000. Assume the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Hall Debt @ 8% $ 300,000 Debt @ 8% $ 600,000 Common stock, $10 par 600,000 Common stock, $10 par 300,000 Total $ 900,000 Total $ 900,000 Common shares 60,000 Common shares 30,000 a. Complete the following table given earnings before interest and taxes of $34,000, $72,000, and $89,000. Assume the tax rate...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here Lenow Hall Debt @ 9% $250,000 Debt @ 9% $500,000 Common stock, $10 par 500,000 Common stock, $10 par_250,000 Total $750,000 Total 750,000 25,000 Common shares 50,000 Common shares a. Complete the following table given earnings before interest and taxes of $29,000, $67,500, and $73,000. Assume the tax rate is 20 percent. (Negative amounts...
Lenows Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenows Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here Lenow Debt $ 22201000 Detta $400.000 Common stock 510 par 44oooo common stock 810 par 220 000 $ 660000 Total Common shares 44.000 Cormon wares 22.000 a. Complete the following table given coming before interest and taxes of $25,000 59400 and $70,000. Assume the tax rate is 20 percent. (Negative amounts should be indicated...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Debt @ 8% Cornmon slock, $10 par Total Common shares S 270.000 Debt @ 8% 540 000 270,000 S 810,000 27,000 540000 Coslock, $10 par S 810,000 Total 54,000 Common shares a. Complete the following table given eamings before interest and taxes of 31,000, $64,800, and $81,000. Assume the tax rate is 10 percent....
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here Lenow Hall Debt @ 10% Common stock, $10 par Total Common shares $200,000 100,000 $300,000 10,000 $100,000 Debt@ 10% 200,000 Common stock, $10 par S300,000 Total 20,000 Common shares a. Complete the following table given earnings before interest and taxes of $20,000, $30,000, and $120,000. Assume the tax rate is 30 percent. (Round your...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Lenow Debt @ 10% Common stock, $10 par Total Common shares Hall $140,000 Debt @ 10% 280,000 Common stock, $10 par $420,000 Total 28,000 Common shares $ 280,000 140,000 $420,000 14,000 a. Complete the following table given earnings before interest and taxes of $18,000, $42,000, and $59,000. Assume the tax rate is 30 percent....
Lenow Drug Stores and Hall Pharmaceuticals are competitors in
the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 8%
$
150,000
Debt @ 8%
$
300,000
Common stock, $10 par
300,000
Common stock, $10 par
150,000
Total
$
450,000
Total
$
450,000
Common shares
30,000
Common shares
15,000
a. Complete the following table given earnings
before interest and taxes of $19,000, $36,000, and $60,000. Assume
the tax rate...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here Lenow Hall Debt @ 9% $250,000 Debt @ 9% $500,000 Common stock, $10 par 500,000 Common stock, $10 par_250,000 Total $750,000 Total 750,000 25,000 Common shares 50,000 Common shares a. Complete the following table given earnings before interest and taxes of $29,000, $67,500, and $73,000. Assume the tax rate is 20 percent. (Negative amounts...
Lenows Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here Lenow Debt $ 22201000 Detta $400.000 Common stock 510 par 44oooo common stock 810 par 220 000 $ 660000 Total Common shares 44.000 Cormon wares 22.000 a. Complete the following table given coming before interest and taxes of $25,000 59400 and $70,000. Assume the tax rate is 20 percent. (Negative amounts should be indicated...
Lenow's Drug Stores and Hall's Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented here. Debt @ 8% Cornmon slock, $10 par Total Common shares S 270.000 Debt @ 8% 540 000 270,000 S 810,000 27,000 540000 Coslock, $10 par S 810,000 Total 54,000 Common shares a. Complete the following table given eamings before interest and taxes of 31,000, $64,800, and $81,000. Assume the tax rate is 10 percent....
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