Reference no: EM132838213
Question - Leverage and stockholder wealth - Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $168,000. The separate capital structures for Sterling and Royal are shown here:
Sterling Royal
Debt @ 12% $840,000 Debt @ 12% $280,000
Common stock, $5 par 560,000 Common stock, $5 par 1,120,000
Total $1,400,000 Total $1,400,000
Common shares 112,000 Common shares 224,000
Required -
a. Compute earnings per share for both firms. Assume a 25 percent tax rate.
b. In part a, you should have gotten the same answer for both companies' earnings per share. Assuming a P/E ratio of 23 for each company, what would its stock price be?
c. Now as part of your analysis, assume the P/E ratio would be 17 for the riskier company in terms of heavy debt utilization in the capital structure and 21 for the less risky company. What would the stock prices for the two firms be under these assumptions?
What is klingon market value of assets
: What is Klingon's market value of assets? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
|
Transformational Leadership
: What are the key attributes of the transformational style of leadership? From either personal experience, or through observation
|
What professional development is needed for existing team
: Imagine that you and several other early childhood teachers you know are going to become a mentoring team. First, consider and list the knowledge.
|
Journalize each sale and liquidation expenses paid
: Journalize each sale, liquidation expenses paid, liabilities paid, and cash paid to partners. Mary, Helga and Luz are partners who share profits
|
Compute earnings per share for both firms
: Common stock, $5 par 560,000 Common stock, $5 par 1,120,000. Compute earnings per share for both firms. Assume a 25 percent tax rate
|
How does the writer exhibit social responsibility
: Write a research essay of about 1,500 words in length in which you construct an argument drawing on one (or two) of the short stories we have read by Irving.
|
What is the value of the shareholder equity account for firm
: What is the value of the shareholders' equity account for this firm? Alesha, Inc., has current asset of $6,000, net fixed assets of $25,100, current liabilities
|
Define your suggestion to improve us health care system
: What would your suggestion be to improve this pathetic image of the US health care system? I would be interested in hearing your thoughts.
|
External forces affect nursing and health care organizations
: What external forces affect nursing and health care organizations? How does the external environment affect strategic management in the health care industry?
|