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Castle, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $26,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 12 percent higher. If there is a recession, then EBIT will be 20 percent lower. The firm is considering a debt issue of $90,000 with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 10,000 shares outstanding. The firm has a tax rate 35 percent. Assume the stock price remains constant.
Problem 1: Calculate the percentage changes in EPS when the economy expands or enters a recession.
Problem 2: Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.
S and G share profits in the ratio 3:2. Assuming S bonus is computed on profit after deducting the said bonus, how much profit share will G receive?
A governmental health care organization, depending on its legal form, may be required to prepare which of the following financial statements?
Common shares, authorized 500,000 shares, issued 83,000 shares $1.200.000. Calculate the amount of the $175,000 to be paid to each group of the shareholders
What controls are present in this stage of handling cash receipts? What steps could be taken regularly by the manager or other supervisor to provide maximum effectiveness to these controls?
Calculate the price of the bond with semi-annual discrete compounding. The face value is F = £100, the coupon rate is 8% p.a.
Calculate the internal rate of return for both investments. Assume the cost of capital is 7%, calculate the NPV for both investments.
Which amount of profit form reissuance will be reported on the income statement - Cody's total stockholders equity should increase or decrease by
What is the account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance?
Isn't there a conflict in looking for fraud on the part of the folks who pay you? If there is a conflict, explain how could we resolve it (be imaginative)? If there is not a conflict, why not?
Compute return on common stockholders equity for each year and (b) earnings per share for each year, and (c) discuss the changes in each.
Amelia Corporation Refer to the information above. If Amelia paid a total of $75,000 in dividends, how much would each common stockholder receive for each share of stock owned
Penner and torres decide to merge their proprietorships into partnerships called pent or company. the balance sheet of torees co. shows accounts receivable $16,000 less : allowance for doubtful accounts 1,200 14,800 equitment 20,000 less:accumulated ..
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