Abe forrester and three of his friends from college have

Assignment Help Finance Basics

Reference no: EM13451844

Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonio. To finance the new venture two plans have been proposed. Plan A is an all-common-equity structure in which 2.3 million dollars would be raised by selling 84,000 shares of common stock. Plan B would involve issuing 1.1 million dollars in long term bonds with an effective interest rate of 11.7% plus a 1.2 million would be raised by selling 42,000 shares of common stock. The debt funds raised under plan B have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firms capital structure. Abe and his partners plan to use a 40% tax rate in their analysis, and they have hired you on a consulting basis to do the following: A. Find the EBIT indifference level associated with the two financing plans. B. Prepare a pro forma income statement for the EBIT level solved for in Part a. that shows that EPS will be the same regardless whether Plan A or Plan B is chosen?

Reference no: EM13451844

Questions Cloud

For many organizations relationship marketing is more : question 1the internet has allowed many companies to shift sales support for small accounts to e-commerce sites and

Compute the overhead rate set at the beginning of the year : ipx is a specialized packaging company that packages other manufacturers products. other manufacturers ship their

What would occur to employment and unemployment numbers if : what would happen to employment and unemployment numbers if an increasing number of retired persons decided to set up

For many organizations relationship marketing is more : question 1the internet has allowed many companies to shift sales support for small accounts to e-commerce sites and

Abe forrester and three of his friends from college have : abe forrester and three of his friends from college have interested a group of venture capitalists in backing their

Kak and pepsee are the only producers of soft drinks tck : koak and pepsee are the only producers of soft drinks tck 100 5q amp tcp10010q the market demand for soft drinks is

An easily identifiable demographic group which is often : question 1an easily identifiable demographic group which is often targeted by marketers is college students. do you

Create a set of best practices for leadership of : design a set of best practices for the leadership of cross-cultural virtual teams. consider the following questions in

Write a brief paragraph describing in your own words the : part 1 - the push-pull marketing strategy bullwrite a brief paragraph in your own words that defines the concept of

User Account

All Pages