Reference no: EM131967507
Landsing Inc. currently has $1, 500,000 of 7% coupon bonds and 50,000 common shares outstanding. The tax rate is 40%. Landsing is considering a new project which requires an investment of $2,000,000.
The company is considering two options for raising the capital:
Option 1: Sell $2,000,000 worth of common stock at $50 per share
Option 2: Issue $1, 500,000 of 8% coupon bonds with a 15 year maturity, and $500,000 of common stock at $50 per share.
a) Calculate the EBIT indifference point for the two options.
b) What is the EPS at the EBIT indifference point?
c) At EBIT levels above the EBIT indifference point which option is better?
|
Allocate the joint costs using the relative sales values
: Allocate the joint costs using the relative sales values. With these costs, what is the profit or loss associated with Copper?
|
|
Capital from the destination country
: Identify and explain any conditions on the repatriation of profit and capital from the destination country?
|
|
What is the rate of return for an investor
: What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond one year later for $1,037.19?
|
|
How can firms use transfer prices to improve its performance
: What is a transfer price? How can firms use transfer prices to improve its performance? Be specific and provide examples.
|
|
What is the eps at the ebit indifference point
: Calculate the EBIT indifference point for the two options. What is the EPS at the EBIT indifference point?
|
|
Compute what is sales revenue
: The Abacus Company had the following activity and balances for the year ended 2014. Compute what is sales revenue?
|
|
Determining the surviving spouse
: How much federal estate tax would the surviving spouse have to pay, assuming that the estate is taxed at the 45 percent rate?
|
|
What is the book value per share
: A company has 50,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $1,470,000. What is the book value per share?
|
|
What was the heir tax liability
: If the estate was valued at $2,129,000 and the estate was taxed at 45 percent, what was the heir's tax liability? (Do not round intermediate calculations.)
|