Relationship in earnings per share and the lebel of ebit

Reference no: EM1366461

Cain Auto Supplies and Able Auto Parts are competitors in aftermarket for auto supplies. The seperate capital structures for Cain and Able are listed below:

Cain
Debt @10%...............$50,000
Common Stock, $10 par.....100,000

Total................................$150,000
Common Shares............... 10,000

ABLE
Debt @ 10%......................$100,000
Common stock, $10 par...... 50,000
Total.................................$150,000
Common Shares............... 5,000

a) How do I compare earnings per share if earnings before interest and taxes are $10,000, $15,000, and $50,000 (assume a 30 percent tax rate).

b) How do I explain the relationship between earnings per share and the lebel of EBIT?

c) How do i explain the following: If the cost of debt went up to 12% and all other factors remained equal, what would be the break-even level for EBIT?

Reference no: EM1366461

Questions Cloud

Determination of demand and supply : Early this year, thousands of Americans flocked to Apple's outlets to purchase iPad 2 sold by iconic brand. Long queues snaked outside many of Apple's outlets dotted over the states.

Computing the break-even point in units : Shock Electronics sells portable heaters for $25 each unit, and the variable expenses to manufacture them is $17. Mr. Amps estimates that the fixed costs are $96,000.

Calculating the degree of operating leverage : The Harding corporation produces skates. The company's income statement for 2001 is as follows, calculate the Degree of operating leverage

Analysis of price change of product-supply and demand : Use demand and supply analysis to illustrate the changes in chicken prices described in the article. Describe what has happened in the corn and soybean-meal markets and how that has influenced the chicken market.

Relationship in earnings per share and the lebel of ebit : Cain Auto Supplies and Able Auto Parts are competitors in aftermarket for auto supplies. The seperate capital structures for Cain and Able are listed below;

Sensitivity of demand for ipods : Determine how the following situations will affect the demand curve for ipods.

Finance example - break even analysis : Assume EducateComp knows its fixed expenses are $100,000, its variable costs are $500 each copy of AlgeComp, and they must to sell 15000 copies of AlgeComp to break even the first year.

What type of sampling was this study : What type of sampling was this study and what is your analysis of this approach? What are the advantages and disadvantages of this approach?

To what extent is merit determined by opportunity : To what extent is merit determined by opportunity and Explain whether you agree that wealth and background, among other things, can affect one's ability to achieve and weather such advantage are determinative of success?

User Account

All Pages