Significance of indifference point

Assignment Help Finance Basics
Reference no: EM133111888

Manya Makeup products Ltd's capital structure consists of 1.5 million equity shares and 500,000 preference shares. Preference shares carry a dividend of Rs. 12 per share. The EPS is Rs. 2.00. The company requires Rs. 10 million of external financing for which it is considering 2 alternatives:-

(i) issuing 1 million equity shares for Rs. 10 each,

(ii) Issuing Rs. 10 million worth of Debentures carrying 15% interest.

Compute the EPS-EBIT indifference point when tax rate is 50%. Write a detailed note on the significance of indifference point.

Reference no: EM133111888

Questions Cloud

Prepare the journal entries to record the sale on November : Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021
Calculate the difference in roe for the coming year : Assume that your firm had net income (earnings) this last year of $9,465,765.00 and had 2,280,907 common shares outstanding with a book value of $32 per share.
What is the initial outlay : MBA Corp plans to use its idle building that can potentially be rented for $15,000 per annum to set up a manufacturing machinery there.
Prepare journal entries for the loan : On July 15, 2020, Lynn's Pins (a local bowling alley) borrows $150000 from the Bank of Horrible Lending, Prepare journal entries for the loan
Significance of indifference point : Compute the EPS-EBIT indifference point when tax rate is 50%. Write a detailed note on the significance of indifference point.
What rate must Bank B pay for Derek : Derek can deposit $267.00 per month for the next 10 years into an account at Bank A. What rate must Bank B pay for Derek
Role of management accounting in business : Examine the key problems with traditional management accounting techniques when applied in a modern business environment
What is wal gain-loss on the futures contract : Wal is a sheep farmer from out west. When he shears his flock in 3 months' time he will have approximately 9,000 kilograms of wool. The current price of the SFE
What is the value today of receiving : Assume the real rate of interest is 4.00% and the inflation rate is 2.00%. What is the value today of receiving 11,002.00 in 7.00 years

Reviews

Write a Review

Finance Basics Questions & Answers

  Find the balance on july 1

Shoreline Insurance deposited $27,000 in an account paying compounded daily on April 2 and deposited an additional $4,200 in the account

  What is the project''s annual operating cash flow

Company Z is analyzing a 5-year project that has an initial cost for fixed assets of $1.6 million. This cost will be depreciated on a straight-line basis to a zero book value over the life of the project. At the end of the project, the assets will be..

  Derive the project free cash flows

Derive the project's free cash flows to the firm for each year of the proposed investment (including the initial investment outlay).

  Explain what is meant by risk and how risk is measured

Explain what is meant by Risk and how Risk is measured. In addition, explain at least two models of Risk and Return.

  Flipping investment properties in flagstaff

Andrew has been working with his Uncle Al over the past few years flipping investment properties in Flagstaff. This has been a very profitable endeavor for Al

  Determine the compound amount

1. Determine the compound amount if P15 ,000.00 is invested at 5% compound quarterly for 6 years

  Project internal rate of return-the everett co

The Everett Co. is looking a project with an outlay of $829 which will have a positive cash flow at t = 3 of $1,087 with no other cash flows at t = 1 and t = 2.

  Nonexperimental and the quasi experimental

Describe the basic problem that threatens internal validity for nonequivalent group designs.- Explain why one is considered nonexperimental and the other is quasi-experimental.

  Calculate the npv of each alternative using the six steps

Calculate the NPV of each alternative using the six steps of capital budgeting and the cost savings shown in Figure 1 above. Which alternative

  What is the annual level payment on the old debt

What is the annual level payment on the old debt?

  Calculate the effective duration of a bond

Calculate the effective duration of a bond to a 100 basis point change in interest rates with a 6-1/4 coupon, 10-years remaining to maturity, and an asking quote of 110.7811 (decimal, not 32nds).Please use Chapter 18 material and the Lectures.

  Which of the following best describes a floating-rate bond

Which of the following best describes a floating-rate bond?

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!

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