User Account

All Pages

Calculate earnings per share

Assignment Help Finance Basics
Reference no: EM131848775

Question: A company has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $28,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 10 percent higher. If there is a recession, then EBIT will be 25 percent lower. The firm is considering a debt issue of $48,000 with an interest rate of 4 percent. The proceeds will be used to repurchase shares of stock. There are currently 20,000 shares outstanding. Ignore taxes for this problem.

a-1. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

EPS:

Recession $

Normal $

Expansion $

a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whole number, e.g., 32.)

Percentage changes in EPS

Recession

Expansion

b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

EPS:

Recession $

Normal $

Expansion $

b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Percentage changes in EPS

Recession

Expansion

Please so all work so I can work the problem out too please!! Thanks

Reference no: EM131848775

Questions Cloud

Discuss crimes against public decency and morality : Examine factors that a jury might consider in determining if the death penalty is an appropriate sentence.
Structure of interest rates for risk-free zero-coupon : Suppose the term structure of interest rates for risk-free zero-coupon bonds is as follows:
So what is the irr : So what is the IRR? How did you calculate it?
What type of effects do you think these forms of media have : When Edwin Sutherland wrote his theory of differential association children were not watching television and movies on a regular basis.
Calculate earnings per share : Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations
Discuss the channels of effect from tariff : Discuss the currency and price - It is argued that a tarriff may help promote employment in a single industry, but is not likely to help employment in general
What is your definition of contingency planning : How can we best minimize both the underreporting and over reporting of child abuse?" What is your definition of "contingency planning"?
What is the firm eva : Its total invested capital is $20,000,000 and its after tax percentage cost of capital is 8%. What is the firm's EVA?
Analyze the mission statement of the organization : Analyze the organization's mission statement. Does it address the following core components?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the estimated coefficient of variation

A home owner with a large library needs to estimate the purchase cost and replacement value of the book collection for insurance purposes.

  What is the earnings per share for abc

What is the earnings per share for ABC?

  What does the beta of the second stock have to be

You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.92. What does the beta of the second stock have to be if you want the portfolio to have a beta of 0.76?

  Estimate carefully the value of charlotte mill to greenearth

Estimate Green Earth's valuation for Charlotte Mill-Estimate carefully the value of the Charlotte mill to GreenEarth. From a financial standpoint, at which price would the purchase be a value-making proposition for GreenEarth

  Find the standard deviations for different sector funds

Log on to www.fidelity.com and find first the standard deviation of returns on the Fidelity 500 Index Fund, which replicates the S&P 500.

  How would the minimum yearly cash inflow change

If Etsitty requires a 14% return on its investment, what minimum yearly cash inflow will be necessary for the company to go forward with this project? b. How would the minimum yearly cash inflow change if the company required a 10% return on its inve..

  How would you assess the value of this liability

Explain what questions would you raise with the CEO over the firm's litigation liability - How would you assess whether the firm should record a liability for this risk, and if so, how would you assess the value of this liability?

  Calculate barrys return on assets

Barry Sanders, likely the best running back to ever play football, has opened a successful used-car dealership. He has noted a higher than normal percentage.

  What is the level of current liabilities

A debt ratio of 0.42, noncurrent liabilities of $20,000 and total assets of $70,000. What is the level of current liabilities?

  Generate operator-precedence relations

A grammar is said to be a (uniquely invertible) operator-precedence grammar if it is an operator grammar with no two righ[ sides that have the same pattern of terminals.

  Discuss the possibility of a not-for-profit health care

Discuss the possibility of a not-for-profit health care organization issuing stock and why the management of such an organization might want to do this. Explain your rationale.

  Budget what is a final

what is a final

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd