Calculate earnings per share and eps

Assignment Help Financial Accounting

Reference no: EM131337334

Kaelea, Inc., has no debt outstanding and a total market value of $100,000. Earnings before interest and taxes, EBIT, are projected to be $8,400 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 24 percent higher. If there is a recession, then EBIT will be 31 percent lower. The company is considering a $35,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 4,000 shares outstanding. Ignore taxes for this problem. a. 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 $ b. 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 and enter your answers as a percent rounded to the nearest whole number, e.g., 32.) %ΔEPS Recession % Expansion % Assume the company goes through with recapitalization. c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Recession $ Normal $ Expansion $ d. 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 and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) %ΔEPS Recession % Expansion %

Reference no: EM131337334

Questions Cloud

Estimate based on a standard empirical correlation : What is the corresponding free convection heat transfer coefficient? Compare this result with an estimate based on a standard empirical correlation.

Create portfolio with expected return : You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. Assume your goal is to create a portfolio with an expected return of 12.55 percent. How..

What outcomes arise from type 2 diabetes in african american : What outcomes arise from Type 2 diabetes in African American women?Who else is affected by them? If the women diagnosed with type 2 diabetes, their families, their friends, their community and who else will get affected by them? (Expand the thought..

Bilingual workers skills are compensated : What specific steps can organizations take to ensure that bilingual workers' skills are compensated when these skills are job relevant, in order to encourage bilingualism among employees and to reduce resistance to Spanish speakers?

Calculate earnings per share and eps : Kaelea, Inc., has no debt outstanding and a total market value of $100,000. Earnings before interest and taxes, EBIT, are projected to be $8,400 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 24 perc..

Describe the internal and external threats to security : Create a Microsoft Word plan of no more than 350 words that includes the following: Describe the internal and external threats to security for your project.

Find the average heat transfer coefficient for the plate : Determine the average heat transfer coefficient for the plate when its temperature is 15°C by two methods: using results from the similarity solution to the boundary layer equations, and using results from an empirical correlation.

Question business ethics : Without question "business ethics" is one of the hot topics of the day. Over the past months we have seen business after business charged with improper practices that violate commonly accepted ethical norms. This has led to a loss of confidence in..

Write an essay about the evolution of e-commerce : Assignment-Read at least three articles about electronic commerce that are no more than 12 months old. Apply the content from the articles and write an essay about the evolution of E-commerce.

User Account

All Pages