What percentage can ebit fall before they can no longer meet

Assignment Help Corporate Finance
Reference no: EM131606556

Assignment

Nile Holdings

Last Years EBIT

$300,000,000

expected EBIT

$333,000,000

Current Portion of existing LT debt

$46,250,000

Interest Due (2017) on Exisiting Debt

$75,000,000

Tax Rate

40%

Times Interest Earned

4

Common Stock Price per share

$50

Commonshares Outstanding

25,000,000.00

Dividends per share

$2.50

A) Assume Nile raises $100 million of new debt at the end of 2016, at an interest rate of 8.25%.

a. Calculate the firm's pro forma 2017 times-interest-earned (TIE) ratio.
b. Calculate 2017's times-burden-covered ratio.
c. What percentage can EBIT fall before they can no longer meet there annual burden?
d. Calculate 2017's earnings per share.

B) Now assume Nile sells 2 million new shares at $50 a share instead of raising new debt.

a. Calculate the firm's pro forma 2017 times-interest-earned (TIE) ratio.
b. Calculate 2017's times-burden-covered ratio
c. What percentage can EBIT fall before they can no longer meet there annual burden?
d. Calculate 2017's earnings per share

C. Comparing parts A and B, would you recommend they issue Debt or Equity?

Reference no: EM131606556

Questions Cloud

Create a report for a practice committee : Create a report for a practice committee at a health care institution. The objective is to convince your peers of the value of using a specific theory.
Ethics codes apply to project selection-capital budgeting : How do ethics codes apply to project selection and capital budgeting?
Does this create disbursement float or collection float : Does this create a disbursement float or collection float? What is your available balance? What is your book balance?
Portfolio weights on standard and? poor depositary? receipts : What are the portfolio weights on the SPDRs and? T-Bills positions?
What percentage can ebit fall before they can no longer meet : What percentage can EBIT fall before they can no longer meet there annual burden? Calculate 2017's earnings per share.
Complete the given sql command for each of the three dbms : Use your favorite Web browser and Web search engine to find out how to enter a date in an SQL query in Oracle, Access, and SQL Server.
Authenticity and the future of women leadership : Please respond to the following: Suppose you were advising female leaders. Recommend two (2) methods you would utilize to help female leaders stay true
Cancer and nutrition and physical activity : Explain how the American Cancer Society might provide education and support. What ACS services would you recommend and why?
What is the discount being offered : What is the discount being offered? How quickly must you pay to get the discount? If you do take the discount, how much should you remit?

Reviews

Write a Review

Corporate Finance Questions & Answers

  A more appropriate model of stock price behavior

Why is the model in below given equation a more appropriate model of stock price behavior than any of these three alternatives?

  True or false questions for risk management

If two corporations have the similar number of exposure units & experience the same average number of losses, then degree of risk for each firm tends to be equal.

  Calculate the present value of these perpetuities

Calculate the present value of the following lump sums -  Calculate the present value of these ordinary annuities and calculate the present value of these perpetuities

  1 aries incorporated wants to buy a new machine which costs

1. aries incorporated wants to buy a new machine which costs 24000. aries will depreciate it fully over its useful life

  Evaluate the impact of the managers

Evaluate the impact of the managers' resistance on the success of the expansion project. What recommendations will you give to mitigate the impact?

  Analyze the number of people who participated

Describe a general opinion poll or survey. Analyze the number of people who participated in the sample compared to the number in the population.

  Explain why an options time value is greatest

Explain why an option's time value is greatest when the stock price is near the exercise price and why it nearly disappears when the option is deep-in- or out-of-the-money?

  How much output should it produce at each plant

The corresponding marginal costs at each plant are MC1 = 8Q1 and MC2 = 4Q2. If the firm produces a total of 24 units of output, how much output should it produce at each plant?

  Implied valuation of deal

Overview of deal -> implied valuation of deal, annual cash flows to and from each party

  Describe the terminal value of the given portfolio

Show that the European put option has the same value as a European call option with the same strike price and maturity.

  Facilitating the exporting process

Some argue that government-sponsored agencies such as the Export-Import Bank of the U.S. essentially subsidizes United State exports;

  Mix of long-term and short-term borrowing

What are the main factors that should be taken into consideration when deciding on the mix of long-term and short-term borrowing necessary to finance the expansion?

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