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(similar to) Degree of financial leverage
Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 18 % 18% ?(annual interest) debt and 3,000 shares of common stock. The firm pays taxes at the rate of 25%. a. Using EBIT values of $82,000 and $117,000?, determine the associated earnings per share? (EPS). b. Using $82,000 of EBIT as a? base, calculate the degree of financial leverage? (DFL). c. Rework parts a and b assuming that the firm has $105,000 of 18% ?(annual interest) debt and 4,000 shares of common stock. a. Calculate the EPS for EBIT value of $82,000 ?below: ? (Round to the nearest dollar except for the EPS which should be rounded to the nearest? cent.) EBIT $ Less: Interest Net profits before taxes $ Less: Taxes (25%) Net profit after taxes $ EPS (3,000 shares) Enter any number in the edit fields and then click Check Answer.
Balance Sheet The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.4 million and net plant and equipment equals $1.9 million. What is the company's total debt? What is the a..
Moerdyk Corporation's bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5%, based on semiannual compounding. What is the bond's price?
In some countries, expropriation(seizure) of foreign investments is a common practice. If you were considering an investment in on of these countries,
A January 31 announcement to shareholders of Premier Financial, a California savings and loan company, stated that the company had “good news” for stockholders. As a recipient of the letter of January 31, you were annoyed by the five-for-four stock s..
AZ Products has 375,000 shares of common stock outstanding at a market price of $32 a share. Next year's annual dividend is expected to be $1.50 a share and the dividend growth rate is 2 percent. The firm also has 7,500 bonds outstanding with a face ..
You're considering two different stocks. what is the difference in the return of the two stocks?
Two years ago you bought a $1,000 zero-coupon bond, which matures in five and a half years from today. You are pleased, because the bond price increased by $52.17 since you purchased it. The yield to maturity on the bond is currently 5.29% (APR). Wha..
Suppose your firm has decided to use a divisional WACC approach to analyze projects.
The world experienced an explosion of cross-border investments before the global crisis of 2007/08, both in terms of foreign direct investments. What's the idea behind those global supply chains? Why does it make sense to have global portfolios of fi..
Amcor limited has a corporate bond outstanding with a 7% coupon semi annual interest 15 years to maturity and face value of $1000.similar bond currently yield 13% but prior agreement company will skip the coupon payments in years 6,7 and 8 (6 payment..
Juan, married and a father of 4 is 45 and expects to work until 65. he earns 70,000$ a year and expects an increase annually of 5%. Juan expects inflation to be 4% over his working life. His personal consumption is earl to 10% after tax earning and h..
Your firm has outstanding bonds with a 0.13 coupon and 0.10 yield to maturity. Your CFO believes that you can issue new bonds that would provide a similar yield to maturity. If your marginal tax rate ir 0.40, what is your firm's after-tax cost of deb..
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