18. Combined leverage is concerned with the relationship between changes in EBIT and changes in EPS....
18. Combined leverage is concerned with the relationship between
changes in EBIT and changes in EPS.
changes in volume and changes in EPS.
changes in volume and changes in EBIT.
changes in EBIT and changes in net income.
Homework Answers
changes in volume and changes in EPS.
Combined leverage shows the combined effect of operating and financial leverage. It shows the change in EPS with respect to change sales volume.
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18. Combined leverage is concerned with the relationship
between
changes in EBIT and changes in EPS....
1 pts Question 3 costs on the leverage measures the effect of fixed relationship between EBIT...
1 pts Question 3 costs on the leverage measures the effect of fixed relationship between EBIT and EPS. Operating financial Financial; operating Financial; financial Operating; operating
b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate b-2. What...
b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate b-2. What is the cost of debt? Cost of debt b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT? Break-even...
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...
EBIT-EPS analysis) A group of retired college professors has decided to form a small manufacturing corporation...
EBIT-EPS analysis) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture. The investors have proposed two financing plans. Plan A is an all-common-equity alternative. Under this agreement, 1.4 million common shares will be sold to net the firm $ 10 per share. Plan B involves the use of financial leverage. A debt issue with a 20-year maturity period will be privately placed. The debt issue...
Banks are concerned with debt to income and leverage. You have to fall within key areas...
Banks are concerned with debt to income and leverage. You have to fall within key areas to meet their requirements. Managers in your company must understand financial statements. The devil is in the details. A financial manager must also be concerned with the presentation of the financial statements as well. Why is it essential to understand the relationship between each of the financial statements (income, cash flow, balance sheet)?
Problem 16-1 EBIT and Leverage [LO1] Ghost, Inc., has no debt outstanding and a total market...
Problem 16-1 EBIT and Leverage [LO1] Ghost, Inc., has no debt outstanding and a total market value of $250,000. Earnings before interest and taxes, EBIT, are projected to be $42,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percent higher. If there is a recession, then EBIT will be 30 percent lower. The company is considering a $100,000 debt issue with an interest rate of 8 percent. The proceeds will...
BASIC QUESTIONS (1-13 1. EBIT and Leverage. Bushranger Building Ltd (BBL) has no debt outstanding and...
BASIC QUESTIONS (1-13 1. EBIT and Leverage. Bushranger Building Ltd (BBL) has no debt outstanding and a total marker will be g a $51 000 value of $156 000. Earnings before interest and taxes, EBIT, are projected to be $13 100 if economic conditions are normal. If there is strong expansion in the economy, then EBIT 15% higher. If there is a recession, then EBIT will be 25% lower. BBL is considerin debt issue with a 5.5%interest rate. The proceeds...
2 in particular st outstanding and a total market C(Questions 1-13) 1. EBIT and Leverage. Kaelea,...
2 in particular
st outstanding and a total market C(Questions 1-13) 1. EBIT and Leverage. Kaelea, Inc., has no debt outstanding and a to value of $194,775. Earnings before interest and taxes, EBIT, are proiecte $13,800 if economic conditions are normal. If there is strong expansion in economy, then EBIT will be 20 percent higher. If there is a recession, then EDT will be 35 percent lower. The company is considering a $39,750 debt issue with an interest rate of...
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...
degree of operating leverage and financial leverage
reflects last year’s operations:Sales $18,000,000Variable costs 7,000,000Revenue before fixed costs $11,000,000Fixed costs 6,000,000EBIT $5,000,000Interest expense 1,750,000Earnings before taxes (EBT) $3,250,000Taxes 1,250,000Net income $2,000,000REQUIRED:1. At this level of output, what is the degree of operating leverage?2. What is the degree of financial leverage?3. What is the degree of combined leverage?4. If sales increase by 15%, by what percent would EBT (and net income) increase?5. What is your firm’s break-even point in sales dollars?
1 pts Question 3 costs on the leverage measures the effect of fixed relationship between EBIT and EPS. Operating financial Financial; operating Financial; financial Operating; operating
b-1. What is the EBIT/TA rate when the firm's have equal EPS? EBIT/TA rate b-2. What is the cost of debt? Cost of debt b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) the cost of debt. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT? Break-even...
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...
BASIC QUESTIONS (1-13 1. EBIT and Leverage. Bushranger Building Ltd (BBL) has no debt outstanding and a total marker will be g a $51 000 value of $156 000. Earnings before interest and taxes, EBIT, are projected to be $13 100 if economic conditions are normal. If there is strong expansion in the economy, then EBIT 15% higher. If there is a recession, then EBIT will be 25% lower. BBL is considerin debt issue with a 5.5%interest rate. The proceeds...
2 in particular
st outstanding and a total market C(Questions 1-13) 1. EBIT and Leverage. Kaelea, Inc., has no debt outstanding and a to value of $194,775. Earnings before interest and taxes, EBIT, are proiecte $13,800 if economic conditions are normal. If there is strong expansion in economy, then EBIT will be 20 percent higher. If there is a recession, then EDT will be 35 percent lower. The company is considering a $39,750 debt issue with an interest rate of...
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...
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