p*******u
发帖数: 58 | 1 Data-Check is considering two capital structures. The key information is
shown in the following table. Assume a 40% tax rate.
Source of capital Structure A Structure B
Long-term debt $100,000 at 16% coupon rate $200,000 at 17%
coupon rate
Common stock 4,000 shares 2,000 shares
a. Calculate two EBIT-EPS coordinates for each of the structures by
selecting any two EBIT values and finding their associated EPS.
c. Indicate over what EBIT range | h********m
发帖数: 386 | 2
Structure A Structure B
interest expense 16,000 34,000
A's EPS = (1-40%)(EBIT - 16000)/4000
B's EPS = (1-40%)(EBIT - 34000)/2000
EPS of A and B will be the same when EBIT reaches 52000, B's EPS will exceed
A's after that.
preferred.
so far I only had two lectures in corp finance. Looks like we should try to
maximize firm's total value when considering which structure is preferred. I
think we should choose B when EBIT>34,000 to ma
【在 p*******u 的大作中提到】
: Data-Check is considering two capital structures. The key information is
: shown in the following table. Assume a 40% tax rate.
: Source of capital Structure A Structure B
: Long-term debt $100,000 at 16% coupon rate $200,000 at 17%
: coupon rate
: Common stock 4,000 shares 2,000 shares
: a. Calculate two EBIT-EPS coordinates for each of the structures by
: selecting any two EBIT values and finding their associated EPS.
: c. Indicate over what EBIT range
| m****t
发帖数: 1 | 3
exceed
to
I
not
for part a you are right,
for part c, you are partially right, for structure A, EBIT>=16000 and for
structure B EBIT>=34000 since only if the net earning>=0, interest tax
shield is meaningful
【在 h********m 的大作中提到】
:
: Structure A Structure B
: interest expense 16,000 34,000
: A's EPS = (1-40%)(EBIT - 16000)/4000
: B's EPS = (1-40%)(EBIT - 34000)/2000
: EPS of A and B will be the same when EBIT reaches 52000, B's EPS will exceed
: A's after that.
: preferred.
: so far I only had two lectures in corp finance. Looks like we should try to
: maximize firm's total value when considering which structure is preferred. I
| p*******u
发帖数: 58 | 4 for part c, you are partially right, for structure A, EBIT>=16000 and for
structure B EBIT>=34000 since only if the net earning>=0, interest tax
shield is meaningful |
|
