Integrative-Optimal capital structure Medallion Cooling Systems, Inc., has total assets of $10,200,000, EBIT of $2,000,000, and preferred dividends of $197,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembleddata on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment:Capital structuredebt ratio0%15304560Debt RatioEBITLess: InterestEBTTaxes @40%Net profitLess: PreferreddividendsEPSProfits available tocommon stockholders# shares outstandinga. Calculate earnings per share for each level of indebtedness.b. Use the equation Po EPS/r, and the earnings per share calculated in part (a) to calculate a price per share for each level of indebtedness.c. Choose the optimal capital structure. Justify your choice.a. Calculate earnings per share for each level of indebtedness.Calculate the EPS below: (Round to the nearest dollar. Round the EPS to the nearest cent.)Cost of debt, rd0%7.89.112.114.7$$$$$$$$$Number of commonstock shares0%2,000,000202,000174,000141,000110,00076,000202,000Required return, rs11.7%13.214.216.219.9

Name: Integrative-Optimal capital structure Medallion Cooling Systems, Inc.
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Description: Integrative-Optimal capital structure Medallion Cooling Systems, Inc., has total assets of $10,200,000, EBIT of $2,000,000, and preferred dividends of $197,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, t

In calculation of earning per share, first calculate the earning available to the common share…

Business

Finance

a. Calculate earnings per share for each level of indebtedness. Calculate the EPS below: (Round to the nearest dollar. Round the EPS to the nearest cent.) Debt Ratio EBIT Less: Interest EBT Taxes @40% Net profit Less: Preferred dividends Profits available to common stockholders #shares outstanding EPS $ $ $ $ $ $ $ $ 0% 2,000,000 202,000

a. Calculate earnings per share for each level of indebtedness. Calculate the EPS below: (Round to the nearest dollar. Round the EPS to the nearest cent.) Debt Ratio EBIT Less: Interest EBT Taxes @40% Net profit Less: Preferred dividends Profits available to common stockholders #shares outstanding EPS $ $ $ $ $ $ $ $ 0% 2,000,000 202,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

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Integrative-Optimal capital structure Medallion Cooling Systems, Inc., has total assets of $9,400,000, EBIT of $1,960,000, and preferred dividends of $199,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment: Capital structure debt ratio 0% 15 30 45 60 Debt Ratio EBIT Less: Interest EBT Taxes @40% Net profit Less: Preferred dividends EPS Profits available to common stockholders # shares outstanding a. Calculate earnings per share for each level of indebtedness. b. Use the equation Po EPS/rs and the earnings per share calculated in part (a) to calculate a price per share for each level of indebtedness. = c. Choose the optimal capital structure. Justify your choice. $ $ $ a. Calculate earnings per share for each level of indebtedness. Calculate the EPS below: (Round to the nearest…
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