Total assets of the firm is $5,000,000. Outstanding stock is 50,000 shares. EBIT is $500,000. Corporate debt is 50% and the debt interest rate is 5%. The corporate tax rate is 40%. Calculate EPS and ROE
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Total assets of the firm is $5,000,000. Outstanding stock is 50,000 shares. EBIT is $500,000.
Corporate debt is 50% and the debt interest rate is 5%. The corporate tax rate is 40%.
Calculate EPS and ROE
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- a firm's financial data shows the following: Equity = $8,000 Debt = $2,000 Re = 12.5% Rd = 6% Tax rate = 30% Calculate the WACCJames Madison Ltd. expects a net income of 200,000. The company has 5% of 1,000,000 bonds payable. The equity capitalization rate of the company is 20%. (a) Calculate the value of the firm and average cost of capital according to the net income approach (ignoring income tax).The balance sheet of Colton corporation shows long term debt of $50 million Shareholders equity of $50 million While the income statements shows ebit of $14.1 million and interest expenses of $5 million If Colton has a tax bracket of 40% what is the roe?
- The Plastic Corporation has a current capital structure consisting of $400,000 of 10% debt and 3,000 shares of common stock. The tax rate is 40%. Determine the earnings per share (EPS) when EBIT is $80,000 and $120,000. Calculate the degree of financial leverage (DFL) using EBIT of $80,000 as a base.A company finances its operations with 57 percent debt and the rest using equity. The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 16% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 40%. Using $80,000 of EBIT as a base, calculate the degree of financial leverage (DFL).
- Here is Icknield’s market-value balance sheet (figures in $ millions): Net working capital $550 Debt $800 long term assets $2,150 Equity $1,900 value of firm $2,700 $2,700 The debt is yielding 7%, and the cost of equity is 14%. The tax rate is 21%. Investors expect this level of debt to be permanent. a. What is Icknield’s WACC? b. How would the market-value balance sheet change if Icknield retired all its debt?ABC Company’s cost of equity is 18%, its before-tax cost of debt is 8%, and its corporate tax rate is 40%. Given the following balance sheet, calculate the after-tax weighted-average cost of capital. Assets Liabilities Cash P 100 Accounts payable P 200 Accounts Receivable 400 Accrued taxes due 200 Inventories 200 Long-term debt 400 Plant & equipment 1,300 Equity 1,200 P2,000 P2,000ABC Company’s cost of equity is 18%, its before-tax cost of debt is 8%, and its corporate tax rate is 40%. Given the following balance sheet, calculate the after-tax weighted-average cost of capital. Assets Liabilities Cash P 100 Accounts payable P 200 Accounts Receivable 400 Accrued taxes due 200 Inventories 200 Long-term debt 400 Plant & equipment 1,300 Equity 1,200 P2,000 P2,000 A. 14.7% C. 9.7% B. 10.3% D. 16.8%
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