Consider a firm with an EBITDA of $1,100,000 and an EBIT of $1,000,000. The firm finances its assets with $4,640,000 debt (costing 8.4 percent, all of which is tax deductible) and 214,000 shares of stock selling at $12 per share. To reduce risk associated with this financial leverage, the firm is considering reducing its debt by $2,640,000 by selling additional shares of stock. The firm’s tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $1,000,000. Calculate the EPS before and after the change in capital structure and indicate changes in EPS.

Check my work Consider a firm with an EBIT of $866,000. The firm finances its assets with $2,660,000 debt (costing 8 percent and is all tax deductible) and 560,000 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 360,000 shares of stock. The firm's tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $866,000. Calculate the change in the firm's EPS from this change in capital structure. (Do not round intermediate calculations and round your final answers to 2 decimal places.) EPS before EPS after Difference

Currently, Dividend Airlines is an unlevered firm and expects to generate $330 free cash flow each year in perpetuity. Its corporate tax rate is 37%. The firm is considering a capital structure to allow $361 of debt. The debt is assumed to be rolled over when it matures with the same amount of principal. Its cost of debt capital is 15%. Similar unlevered firms in the same industry have a cost of equity capital of 28%. Assume no agency costs nor default risk. What will the value of Dividend Airlines be after the change of capital structure?

An​ all-equity firm currently has​ 1,000,000 shares of stock outstanding and is considering borrowing​ $5,000,000 at​ 10% and buying back​ one-fourth of those shares. Assume a tax rate of​ 30% and EBIT is​ $ 1,500,000. Should this company undertake the capital restructuring and​ why?

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Bushwhacker Mowing needs $360 million to support growth. If it issues new common stock to raise the funds, the issuing cost charged by the investment banker will be 4 percent. Additional costs associated with the issue will total $288,000. If Bushwhacker can issue stock at $60 per share, how many shares of common stock must be issued so that it has $360 million after flotation costs? Show how much of the issue will consist of flotation costs and how much Bushwhacker will receive after flotation costs are paid.

Hawar International is a shipping firm with a current share price of $4.50 and 10 million shares outstanding. Suppose Hawar announces plans to lower its corporate taxes by borrowing $10 million and repurchasing shares. a. With perfect capital​ markets, what will the share price be after this​ announcement? b. Suppose that Hawar pays a corporate tax rate of 40%​, and that shareholders expect the change in debt to be permanent. If the only imperfection is corporate​ taxes, what will the share price be after this​ announcement? c. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $4.55 after this​ announcement, what is the PV of financial distress costs Hawar will incur as the result of this new​ debt?       Question content area bottom Part 1 a. With perfect capital​ markets, what will the share price be after this​ announcement?   With perfect capital​ markets, the share price will be ​$enter your response here per share