Compute the EPS and ROE Equity: Issue 85,000 common shares with a current market price of...

Transcribed Image Text:

Compute the EPS and ROE Equity: Issue 85,000 common shares with a current market price of $15 each. Debt: Take on $1,275,000 of debt with a 4.5% interest and $181,000 principle payments annually Current debt outstanding is $1,420,000 with 5% interest and $175,000 principle payments annually Current equity is $1,425,000 with 78,000 common shares and $0.50 dividend per share annually Tax rate 20% Assume EBIT in a bad economy is $252,000 and EBIT in a great economy is $1,452,000. If we were heading into a bad economy, which funding would be best? (1 point) If we were heading into a good economy, which funding would be best? (1 point) Compute the EPS and ROE Equity: Issue 85,000 common shares with a current market price of $15 each. Debt: Take on $1,275,000 of debt with a 4.5% interest and $181,000 principle payments annually Current debt outstanding is $1,420,000 with 5% interest and $175,000 principle payments annually Current equity is $1,425,000 with 78,000 common shares and $0.50 dividend per share annually Tax rate 20% Assume EBIT in a bad economy is $252,000 and EBIT in a great economy is $1,452,000. If we were heading into a bad economy, which funding would be best? (1 point) If we were heading into a good economy, which funding would be best? (1 point)

Answer rating: 100% (QA)

To calculate the Earnings Per Share EPS and Return on Equity ROE we need to first calculate the Net ... View the full answer