What is the breakeven EBIT

Assignment Help Financial Management

Reference no: EM131507977

Eastern Markets has no debt outstanding and a total market value of $154,000. Earnings before interest and taxes, EBIT, are projected to be $12,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 27 percent higher. If there is a recession, then EBIT will be 55 percent lower. The firm is considering a $20,000 debt issue with an interest rate of 6.5 percent. The proceeds will be used to repurchase shares of stock. There are currently 2,000 shares outstanding. Ignore taxes. What will be the percentage change in EPS if the economy enters a recessionary period? What will be the percentage of change in EPS if the economy enters an expansion period. What is the breakeven EBIT?

Reference no: EM131507977

Questions Cloud

Marginal cost on common equity : what will be All Concrete’s marginal cost (interest rate) on common equity?

Calculate fc engineering capital recovery and annual worth : Calculate FC Engineering's capital recovery and annual worth if they had made the deal at a MARR of 12%.

Calculate the MIRR of project using discounting approach : Calculate the MIRR of the project using the discounting approach.

The costs are assigned to two cost pool : The costs are assigned to two cost pool, one for fixed and one for variable costs. costs are then assigned to the sales department and administrative department

What is the breakeven EBIT : Eastern Markets has no debt outstanding and a total market value of $154,000. What is the breakeven EBIT?

Intend to use a money market hedge : How many pounds should you buy today if you intend to use a money market hedge?

Compute the short-term and long-term portions of auto loan : Compute the short-term and long-term portions of the auto loan.

What is the expected price to purchase one euro at year end : The real risk free rate of return is 3%. Assume parity holds. What is the expected price to purchase one euro at year end?

Calculate the present value of the cash inflows of project : If the company requires a return of 8 percent for such an investment, calculate the present value of the cash inflows of the project.

User Account

All Pages