EPS for Barry corp =210/30 =7.00
EPS for Crawford corp =(210-20)/40 =4.75
Thus the answer is C)
20) Consider two companies in a world with no taxes that are alike except in borrowing...
Base Corp and Eastern Tech are two identical companies except for their capital structures. Neither firm pays taxes. Both firms have EBIT of $35,000 in perpetuity. Base Corp is unlevered and has 5,000 shares outstanding, each worth $20. Eastern Tech is levered and has $25,000 in debt at a cost of debt of Rd = 12%. How much is Base Corp worth? How much is Eastern Tech worth? What is Eastern Tech’s market value of equity? How much would it...
Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $1.26 million of debt financing at 8% interest. The all-equity firm will have a value of $4.2 million and 420,000 shares outstanding. The levered firm will have 294,000 shares outstanding. a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes. a. What is the break-even EBIT for Alpha Company using EPS if there are...
Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $1.44 million of debt financing at 15% interest. The all-equity firm will have a value of $3.6 million and 360,000 shares outstanding. The levered firm will have 216,000 shares outstanding. a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes. a. What is the break-even EBIT for Alpha Company using EPS if there are...
5. A firm is considering financing its $20 million dollars of assets with one of two plans. Plan A consists of $3 million of debt with an interest rate of 6.6%, and 1.7 million shares of common stock. Plan B consists of $10 million dollars in debt with an interest rate of 7.2%, and 1 million shares of common stock. The firm's tax rate is 30%. Calculate the EBIT-EPS breakeven point, and then calculate the earnings per share at this...
Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $1.52 million of debt financing at 13% interest. The all-equity firm will have a value of $7 6 million and 380,000 shares outstanding. The levered firm will have 304,000 shares outstanding a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes a. What is the break-even EBIT for Alpha Company using EPS if there...
i do not understand can you please help! Break-even EBIT (with and without taxes). Alpha Company is looking at two different capital structures, one an all-equity firm and the other levered firm with $4.8 million of debt financing at 6% interest The all-equity firm will have a value of $9.5 milion and 480,000 shares outstanding. The levered from wil have 240,000 shares outstanding a. Find the break even EBIT for Alpha Company using EPS there are no corporate taxes b....
The Canterbury Coach Corporation has EBIT of $3.62 million, and total capital of $20 million, which is 15% debt. There are 425,000 shares of stock outstanding which sell at book value. The firm pays 12% interest on its debt and is subject to a combined state and federal tax rate of 40%. Canterbury is contemplating a capital restructuring to either 30%, 45%, 60%, or 75% debt. a. At the current level of profitability, will more debt enhance results? Why? In...
Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with$3.52 million of debt financing at 8% interest. The all-equity firm will have a value of $8.8 million and 440,000 shares outstanding. The levered firm will have 264,000 shares outstanding. a.What is the break-even EBIT for Alpha Company using EPS if there are no corporate taxes? (Round to the nearest dollar.)
Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.9 million. If a recession occurs, each firm will generate earnings...
Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $4.7 million. If a recession occurs, each firm will generate earnings...