User Account

All Pages

Determine optimal capital structure

Assignment Help Financial Accounting
Reference no: EM132592764

Moses Company has a total asset of 400,000 of which 30% is debt with 12% interest and 70% is equity. This is the current capital structure and Moses earns EBIT of br. 40,000. However Moses panned to get involved in investment of $ 100,000 that would increase his current income from $ 40,000 to $ 60,000. To mobilize $ 100,000 required for invest assume the following two options are available

A. Issuing shares of 1000 each at $ 100

B. Selling bond costing $ 100,000 that bears interest rate of 12.5%

Given the above data and assuming that there is no preferred stock in capital structure

Question A. Determine optimal capital structure

Question B. Calculate degree of financial leverage taken into account 50% tax rate

Question C. Calculate EBIT and EPS at breakeven point

Question D. Decide whether pan A or plan B is better

Reference no: EM132592764

Questions Cloud

Discuss three main ethical controversies : Review the sectioned headed, Two Ethical Exemplars in Chapter 22 of the textbook (Melnyk and Fineout-Overholt, 2015, pages 518-519). Discuss three main.
What will determine how often you generate reports : What are the possible consequences of taxpayers failing to correctly report an amount they are required to pay or meet other tax obligations?
Explain the reasons behind the shift : Explain the reasons behind the shift and how that has influenced the equilibrium price.
How many times is going to be seen the patient : How many times is going to be seen this patient, by the doctor during the program. (treatment frequency). Through which laboratory exam are we going.
Determine optimal capital structure : Calculate degree of financial leverage taken into account 50% tax rate. Determine optimal capital structure. Calculate EBIT and EPS at breakeven point
What are the important components of the article : In your own words, what are the "important components of the article?" How is this concept implemented in todays health car system?
Participation in team is likely to be effective : What are some criteria that organizations can apply to determine with participation in a team is likely to be effective?
Identify potential hazards of hospitalization : Identify potential hazards of hospitalization for all older adult patients (including immobility, delirium, medication side effects, malnutrition.
Would you prefer managing in huge enterprise : we looked at small business. Would you prefer managing in a huge enterprise or a small one? What factors entered into your decision?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Long-term debt and equity financing

Likely level of equity financing and long-term debt - what is the likely level of its long-term debt and equity financing?

  What price will the bonds issue

At what price will the bonds issue? (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.

  How much cash general dollar spend on investing activities

How much cash did General Dollar spend on investing activities during its 2016, 2017, and 2018 fiscal years? Do you think the amount spent

  What are required sales if heese company desires net income

Heese Company has fixed costs of $1,500,000 and variable costs are 40% of sales. What are required sales if Heese Company desires net income of $150,000?

  Determine the cost of timber sold related to depletion

Determine the cost of timber sold related to depletion for 2014. Compute the rate of depreciation per year to be applied to the plant assets under the composite method.

  What is the depreciation charge for the fourth year

Use depreciation by linear function of use. A machine costs $30,000 and will produce 10,000 units and be sold for $6,000. Up to the end of the third year it produced 50,000 units and during the fourth year it produced 10,000 units. What is the deprec..

  The formula for residual income and economic value

When you look carefully at the formula for residual income and economic value added it appears that they are the same so it doesn't matter which one you use. Neither one is better or more accurate than the other. Do you agree? Why or why not? Explain..

  Calculate and comment on the liquidity ratio of Qantas

ACC103 Accounting for Business Decisions Assignment Question, Stott's College, Australia. Calculate and comment on the liquidity ratio of Qantas

  Compute for 2014 and 2013 the profit margin

Compute for 2014 and 2013 the (1) profit margin, (2) asset turnover, (3) return on assets, and (4) return on common stockholders' equity.

  What is the estimated warranty liability at the end of 2018

In 2017, Concord Corporation began selling a new line of products that carry a two-year warranty against defects.

  Determine the operating cost includes cost of manufacturing

Determine The Operating Cost includes cost of manufacturing and overhead expenses such as salaries utilities, advertising and rent.

  Present value and multiple cash flowsinvestment x offers to

present value and multiple cash flows.investment x offers to pay you 7000 per year for eight years whereas investment y

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd