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Question: Consider a firm with an EBIT of $862,000. The firm finances its assets with $2,620,000 debt (costing 7.6 percent) and 520,000 shares of stock selling at $6.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $1,000,000 by selling an additional 320,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $862,000.
Calculate the EPS before and after the change in capital structure and indicate changes in EPS. (Negative answer should be indicated by a minus sign. Round your answers to 5 decimal places.)
EPS Before $__________
EPS After $___________
Difference $__________
How does a stock’s expected price volatility affect the value of a call option on it?
Find an article in the University Library that contains a research study in the functional area of your own job or a functional area you desire to be a part of someday.
suppose that a bank has 10 billion of one-year loans and 30 billion of five-year loans. these are financed by 35
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Prepare a tabular analysis that shows the effects of these transactions on the expanded accounting equation, similar to that shown in Illustration 3-3.
Tom is planning for a very early retirement
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What is the effective annual rate of such a loan (recall that an auto loan typically requires monthly payments)? Show your work.
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