Solution-Calculate the bottom half of the income statement

Calculate the bottom half of the income statement

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Reference no: EM132492961

A company with EBIT of $6,000,000 is considering two financing alternatives. The first alternative would have $25 million of bonds at 8% interest and 1,000,000 common shares outstanding, whereas the second would have $47.5 million of bonds at 8% interest and only 750,000 shares outstanding. The company is in the 35% tax bracket.

Question 1: Calculate the bottom half of the income statement (including EPS) for each financing alternative when EBIT is at $6,000,000.

Question 2: Calculate the bottom half of the income statement (including EPS) for each alternative if EBIT increases by 20%.

Question 3: Calculate the bottom half of the income statement (including EPS) for each alternative if EBIT decreases by 20%.

Question 4: What is the EBIT/EPS indifference point for this firm?

Reference no: EM132492961

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Calculate the bottom half of the income statement

Reference no: EM132492961

Reference no: EM132492961

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