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Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $240,000...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $250,000...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 17% (annual interest) debt and 3,000 shares of common stock. The firm pays taxes at the rate of 22%. a. Using EBIT values of $80,000 and $120,000, determine the associated earnings per share (EPS) b. Using $80,000 of EBIT as a base, calculate the degree of financial leverage (DFL) c. Rework parts a and b assuming that the firm has $105,000 of 17%...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $300,000...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $300,000 of 17% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 30%. a. Using EBIT values of $84,000 and $120,000, determine the associated earnings per share (EPS). b. Using $84,000 of EBIT as a base, calculate the degree of financial leverage (DFL). c. Rework parts a and b assuming that the firm has $97,000 of 17%...
How can I determine current DOL (degree of operating leverage), DFL (degree of financial leverage), and...
How can I determine current
DOL (degree of operating leverage), DFL (degree of financial
leverage), and DCL (degree of combined leverage)? If maximization
of earning per share is the goal, what is the indifference EBIT
(EBIT*)? Also, Once the expansion is completed, the sales are
expected to increase to $5,000,000. How can I calculate the new
EBIT. At the new EBIT which method of financing results in a higher
EPS? Calculate EPS for both plans at this new EBIT.
new...
DFL and graphical display of financing plans Walls and Associates has EBIT of $54,000. Interest costs...
DFL and graphical display of financing plans Walls and Associates has EBIT of $54,000. Interest costs are $16,600, and the firm has 15,300 shares of common stock outstanding Assume a 40% tax rate a. Use the degree of financial leverage (DFL) formula to calculate the DFL for the firm. b. Using a set of EBIT-EPS axes, plot Wells and Associates' financing plan, c. If the firm also has 1,300 shares of preferred stock paying a $6.50 annual dividend per share,...
EBIT-EPS and capital structure Data-Check is considering two capital structures. The kay information is shown in...
EBIT-EPS and capital structure Data-Check is considering two capital structures. The kay information is shown in the following table. Assume a 40% tax rate, Source of capital Structure A Structure B Long-term debt 592.000 at 15 9% coupon rate $184.000 at 16.9% coupon rate Common stock 4,300 shares 2.150 shares a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values b. Plot the two capital structures on a...
Debt and financial risk Tower Interiors has made the forecast of sales shown in the following...
Debt and financial risk Tower Interiors has made the forecast of sales shown in the following table. Also given is the probability of each level of sales. Sales Probability $190,000 0.25 290,000 0.55 390,000 0.20 The firm has fixed operating costs of 575,000 and variable operating costs equal to 60% of the sales level. The company pays 511,400 in interest per period. The tax rate is 40% a. Compute the earnings before interest and taxes (EBIT) for each level of...
Yellow Tartan is a levered firm with the following financial statements: Balance Sheet Income Statement Total...
Yellow Tartan is a levered firm with the following financial statements: Balance Sheet Income Statement Total assets $ 1,000,000 Sales $ 3,500,000 Variable costs -$ 1,200,000 Bonds (coupon rate of 8%) $200,000 Fixed costs -$ 1,000,000 Bonds (coupon rate of 6%) $ 300,000 Depreciation -$ 600,000 Common stock (50,000 o/s) $ 250,000 EBIT $ 700,000 Retained earnings $ 250,000 Interest ?? EBT ?? Total liability $ 1,000,000 Taxes (40%) ?? NI ?? Yellow Tartan is planning to raise $400,000 through...
HELP ME PLEASE! 24. Consider the following leverage scenarios Leverage Scenarios (000s) #2 50% Debt #1 0% Debt #3 80% Debt Capital Debt Equity Total capital Shares $10 Revenue Less costs/ expenses EB...
HELP ME PLEASE!
24. Consider the following leverage scenarios Leverage Scenarios (000s) #2 50% Debt #1 0% Debt #3 80% Debt Capital Debt Equity Total capital Shares $10 Revenue Less costs/ expenses EBIT Interest expense (10%) EBT Taxes @ 40% Earnings after tax ROE EPS $1,600 400 $1,000 1,000 $2,000 $2,000 1,800 200 $2,000 1,800 200 100 100 40 $2,000 1,800 200 160 200 80 16 6% 6% 6% If under certain circumstances, financial leverage enhances performance measured by ROE...
The financial breakeven point for structure A is ? The financial breakeven point for structure B...
The financial breakeven point for structure A is
?
The financial breakeven point for structure B is
?
(Round to the nearest dollar.)
EBIT—EPS and capital structure Data-Check is considering two capital structures. The key information is shown in the following table. Assume a 21% tax rate. Source of capital Long-term debt Common stock Structure A $90,000 at 15.6% coupon rate 4,500 shares Structure B $180,000 at 16.6% coupon rate 2,250 shares a. Calculate two EBIT-EPS coordinates for each of...
A firm has a current capital structure consisting of $400,000 of 6 percent annual interest debt...
A firm has a current capital structure consisting of $400,000 of 6 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 21 percent on ordinary income. If the EBIT is expected to be $200,000, two EBIT-EPS coordinates for the firm's existing capital structure are ________. ($0, $24,000) and ($200,000, $1.82) ($24,000, $0) and ($200,000, $3.52) ($24,000, $0) and ($200,000, $2.78) ($24,000, $0) and ($200,000, $0.74)
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 17% (annual interest) debt and 3,000 shares of common stock. The firm pays taxes at the rate of 22%. a. Using EBIT values of $80,000 and $120,000, determine the associated earnings per share (EPS) b. Using $80,000 of EBIT as a base, calculate the degree of financial leverage (DFL) c. Rework parts a and b assuming that the firm has $105,000 of 17%...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $300,000 of 17% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 30%. a. Using EBIT values of $84,000 and $120,000, determine the associated earnings per share (EPS). b. Using $84,000 of EBIT as a base, calculate the degree of financial leverage (DFL). c. Rework parts a and b assuming that the firm has $97,000 of 17%...
How can I determine current
DOL (degree of operating leverage), DFL (degree of financial
leverage), and DCL (degree of combined leverage)? If maximization
of earning per share is the goal, what is the indifference EBIT
(EBIT*)? Also, Once the expansion is completed, the sales are
expected to increase to $5,000,000. How can I calculate the new
EBIT. At the new EBIT which method of financing results in a higher
EPS? Calculate EPS for both plans at this new EBIT.
new...
DFL and graphical display of financing plans Walls and Associates has EBIT of $54,000. Interest costs are $16,600, and the firm has 15,300 shares of common stock outstanding Assume a 40% tax rate a. Use the degree of financial leverage (DFL) formula to calculate the DFL for the firm. b. Using a set of EBIT-EPS axes, plot Wells and Associates' financing plan, c. If the firm also has 1,300 shares of preferred stock paying a $6.50 annual dividend per share,...
EBIT-EPS and capital structure Data-Check is considering two capital structures. The kay information is shown in the following table. Assume a 40% tax rate, Source of capital Structure A Structure B Long-term debt 592.000 at 15 9% coupon rate $184.000 at 16.9% coupon rate Common stock 4,300 shares 2.150 shares a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values b. Plot the two capital structures on a...
Debt and financial risk Tower Interiors has made the forecast of sales shown in the following table. Also given is the probability of each level of sales. Sales Probability $190,000 0.25 290,000 0.55 390,000 0.20 The firm has fixed operating costs of 575,000 and variable operating costs equal to 60% of the sales level. The company pays 511,400 in interest per period. The tax rate is 40% a. Compute the earnings before interest and taxes (EBIT) for each level of...
HELP ME PLEASE!
24. Consider the following leverage scenarios Leverage Scenarios (000s) #2 50% Debt #1 0% Debt #3 80% Debt Capital Debt Equity Total capital Shares $10 Revenue Less costs/ expenses EBIT Interest expense (10%) EBT Taxes @ 40% Earnings after tax ROE EPS $1,600 400 $1,000 1,000 $2,000 $2,000 1,800 200 $2,000 1,800 200 100 100 40 $2,000 1,800 200 160 200 80 16 6% 6% 6% If under certain circumstances, financial leverage enhances performance measured by ROE...
The financial breakeven point for structure A is
?
The financial breakeven point for structure B is
?
(Round to the nearest dollar.)
EBIT—EPS and capital structure Data-Check is considering two capital structures. The key information is shown in the following table. Assume a 21% tax rate. Source of capital Long-term debt Common stock Structure A $90,000 at 15.6% coupon rate 4,500 shares Structure B $180,000 at 16.6% coupon rate 2,250 shares a. Calculate two EBIT-EPS coordinates for each of...
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