Choo Choo Corp. is an all- equity firm with a market value of $5, 200, 000. The firm is considering a debt issue of $3, 900, 000 at an 8% interest rate and will use the funds to buy back shares in the firm. There are currently 200, 000 shares outstanding and it is a perfect capital market. 14. If the firm keeps its current capital structure and the EBIT is expected to be $750, 000, what would be Choo-Choo's EPS? A) $3.75 B) $8.76 C) $15.00 D) $2.19 E) $ 5.00 15. What is the breakeven level of EBIT between the two capital structures? A) $ 1, 664, 000 B) $1, 333, 333 C) $2, 100, 000 D) $554, 667 E) $416, 000
Choo Choo Corp. is an all- equity firm with a market value of $5, 200, 000. The firm is considering a debt issue of $3, 900, 000 at an 8% interest rate and will use the funds to buy back shares in the firm. There are currently 200, 000 shares outstanding and it is a perfect capital market. 14. If the firm keeps its current capital structure and the EBIT is expected to be $750, 000, what would be Choo-Choo's EPS? A) $3.75 B) $8.76 C) $15.00 D) $2.19 E) $ 5.00 15. What is the breakeven level of EBIT between the two capital structures? A) $ 1, 664, 000 B) $1, 333, 333 C) $2, 100, 000 D) $554, 667 E) $416, 000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Choo Choo Corp. is an all- equity firm with a market value of $5, 200, 000. The firm is considering a debt issue of $3, 900, 000 at an 8% interest rate and will use the funds to buy back shares in the firm. There are currently 200, 000 shares outstanding and it is a perfect capital market. 14. If the firm keeps its current capital structure and the EBIT is expected to be $750, 000, what would be Choo-Choo's EPS? A) $3.75 B) $8.76 C) $15.00 D) $2.19 E) $
5.00 15. What is the breakeven level of EBIT between the two capital structures? A) $
1, 664, 000 B) $1, 333, 333 C) $2, 100, 000
D) $554, 667 E) $416, 000
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