ACE is an all equity firm that is contemplating changing their capital structure to 30% debt 70% equity. Their current f...
ACE is an all equity firm that is contemplating changing their capital structure to 30% debt 70% equity. Their current financial scenario is below.
What is their current EPS? ROA? ROE?
|
Tax |
40% |
|||
|
Current |
Debt/equity |
0% |
100% |
|
|
Assets |
30,000 |
EBIT |
6,000 |
ROA |
|
Debt |
- |
Interest |
- |
|
|
Equity |
30,000 |
EBT |
ROE |
|
|
Proposed Int Rate |
0.06 |
Tax |
||
|
Shares Outs |
1,200 |
EAT |
||
|
Share price |
25 |
EPS |
|
Continuing with ACE, if they change to a 30-70 debt/equity capital structure their EPS will change to $3.90
True
False
Continuing with ACE, if they go forward with the proposed debt/equity change their ROA will increase and ROE will decrease.
True
False
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