Homework Question: Consider a firm with an EBIT of $860,000.

5.00$

Get premium Solution to all your Homework Assignments exclusively on writerkingdom. We have CFA/MBA writers to provide model answers to your every academic problem

Compare

Description

Consider a firm with an EBIT of $860,000. The firm finances its assets with $2,600,000 debt (costing 7.4 percent) and 500,000 shares of stock selling at $5.00 per share. To reduce the firm’s risk associated with this financial leverage, the firm is considering reducing its debt by $1,000,000 by selling an additional 300,000 shares of stock. The firm is in the 30 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $860,000. Calculate the EPs before and after the change in capital structure and indicate changes in EPS. (Negative answer should be indicated by a minus sign. Round your answer to 5 decimal places,) EPS before $ EPS after $ Difference $

Reviews

There are no reviews yet.

Be the first to review “Homework Question: Consider a firm with an EBIT of $860,000.”

Your email address will not be published. Required fields are marked *