13. Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. Debt @ 10% Common stock Total Common shares Cain $50,000 Debt @ 10% 100,000 Common stock $150,000 Total 10,000 Common shares Able $100,000 $0,000 $150,000 $5,000 Page 159 a. Compute EPS if EBIT are $10,000, $15,000, and $50,000 (assume a 30 percent tax rate). b. Explain the relationship between EPS and level of EBIT. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the indifference point for EBIT?

13. Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. Debt @ 10% Common stock Total Common shares Cain $50,000 Debt @ 10% 100,000 Common stock $150,000 Total 10,000 Common shares Able $100,000 $0,000 $150,000 $5,000 Page 159 a. Compute EPS if EBIT are $10,000, $15,000, and $50,000 (assume a 30 percent tax rate). b. Explain the relationship between EPS and level of EBIT. c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the indifference point for EBIT?

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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The company capital structure consist of debt 380000 @ 4.05%, common stock 220000@12.09% and preferred stock 400000 @ 19.50%, calculate company's weighted average cost of capital Select one: O a. 12.99% O b. 11% O c. 9.50% O d. None O e. 11.99%
Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. Cain Able Debt @ 10% $50,000 Debt @ 10% $100,000 Common stock 100,000 Common stock 50,000 Total $150,000 Total $150,000 Common shares 10,000 Common shares 5,000 a. Compute EPS if EBIT are $10,000, $15,000, and $50,000 (assume a 30 percent tax rate). (Round the final answers to 2 decimal places. Do not leave any empty spaces; input a 0 wherever it is required.) Cain Able EPS at $10,000 $ $ EPS at $15,000 $ $ EPS at $50,000 $ $ b. What is the relationship between EPS and level of EBIT? 1. Earnings before interest and taxes is less than cost of debt. (Click to select) 2. Earnings before interest and taxes equals cost of debt. (Click to select) 3. Earnings before interest and taxes is greater than cost of debt. (Click to select) c. If the cost of debt went up to 12 percent and all other factors remained equal, what would be the…
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.. From the following, calculate (a) Debt-Equity Ratio (b) Total Assets to Debt Ratio Equity Share Capital $75,000 Share application money pending allotment $25,000 General Reserve $45,000 Balance in the Statement of Profit & Loss $30,000 Debentures $75,000 Trade Payables $40,000 Outstanding Expenses $10,000
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1 Following is the Balance sheet of Jay Limited: Liabilities Equity Shares of Rs. 10 each Retained Earnings } VESHUR 6% Preference Share of Rs.10 each General Reserve Debenture Redemption Fund 5% Debentures Sundry Creditors Total Liabilities Amoun Required: Calculate value per share by using following 1. Yield Method 2. Net Assets Method t 300,000 200000 Assets Fixed Assets Allowances for Depreciation 21 13303 90,000 880,000 200,000 Current assets 5,000 Preliminary Expenses Unwritten Off Discount 25,000 60,000 Amoun t 600,000 (75,000) 340,000 10,000 5,000 Total Assets Current Assets include investments of Rs.50,000 market price of which is Rs.90,000. Debtors included in current assets are doubtful to the extent of Rs.25,000 for which no provision has been made so far. Debenture interest owes for two years and preference dividends are in arrear for two years. Earnings before tax is Rs.280,000 and Tax rate is 35%. The normal rate of dividend is 20%. 880,000
An accountant for Stability Inc. must calculate the weighted average cost of capital of the corporation using the following information. Interest Rate Accounts payable $35,000,000 0 Long-term debt 10,000,000 8% Common stock 10,000,000 15% Retained earnings 5,000,000 18% What is the weighted average cost of capital of Stability? Select one: a. 8.00% b. 10.25% c. 12.80% d. 6.88%
ed A company has the following balance sheet (market values): Liabilities + Equity Debt Equity Assets Cash Operating Assets 600 1000 400 1200 If the firm has 300, find its fair share price after it repurchases 100 worth of shares: (round your answer to the nearest 0.01)

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