Computation of ebit, Computation of EBIT

Computation of ebit

Reference no: EM1310227

Computation of EBIT - mathermatically, EPS indifference point, graphically.

This company has a present capital structure consisting of common stock (10million shares) the company is planning a major expansion. At this time the company is undecided between the following two financial plans (assume a 40% marginal tax rate)

Plan 1 (equity financing) under this plan an additional 5 million shares of common stock will be sold at$10 each.

Plan 2 (debt financing)$50 million of 10% long term debt will be sold.

One piece of information the company desires for it decision analysis is an EBIT -EPS analysis

a) Compute the EBIT-EPS indifference point

b) Graphically determine the EBIT -EPS indifference point -hint use EBIT =$10million and$25 million.

c) What happens to the indifference point of the interest rate on debt increases and the common stock sales price remains constant?

Reference no: EM1310227

Questions Cloud

Finding the balance in right-of-use asset : Warren Co. recorded a right-of-use asset of $900,000 in 8-year lease under which no profit was recorded at commencement by lessor-The balance in right-of-use asset after 2 years will be:

Computing the cost in ten years using average home costs : The average home costs= $275,000 today. How much will it cost in ten years if price rises by 5% each year?

What is the speed of the large cart after the collision : A 33.0 g bullet moving at 434 m/s strikes a 5.0 kg bag of flour that is on ice, at rest. The bullet passes through the bag, leaving at 295 m/s. How fast is the bag moving while the bullet exits.

Purpose the journal entry at may 31 : Purpose the journal entry at May 31, 2008, to record the sale of the bonds. and the journal entry at September 30, 2008, to record the semiannual bond interest payment.

Computation of ebit : Computation of EBIT - mathermatically, EPS indifference point, graphically and Calculate the EBIT-EPS indifference point and Compute the EBIT-EPS indifference point

Evaluate generally accepted accounting principles : Evaluate generally accepted accounting principles (GAAP) and what bodies provide authoritative support for GAAP? and What elements comprise the FASB's conceptual framework?

Shadow on the ground undergo periodic motion : A spaceship is coming directly toward you while you are in the international space station. You are told that the spaceship is shining sodium light. You have an apparatus that and resolve two closely spaced wavelengths if the difference is 0.55 nm. I..

Cost categories of quality : Explain about the four main cost categories of quality.

Data of company manufacturing overhead account : Hults Corporation has provided data regarding the company's Manufacturing Overhead account for month of November.

User Account

All Pages