You plan to invest in one of two home delivery pizza companies, High and Low, that...

 

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You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commence operations. They are identical except for their use of debt (wa) and the interest rates on their debt--High uses more debt and thus must pay a higher interest rate. Both companies are small, so they are not subject to the interest deduction limitation. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh - EPSLow? Do not round your intermediate calculations. Applicable to Both Firms Capital EBIT Tax rate a. $3.23 Ob. $3.59 c. $2.70 d. $2.82 Oe. $2.52 $1,000,000 $620,000 25% Firm High's Data Wd Shares Int. rate 70% 90,000 10% Firm Low's Data Wd Shares Int. rate 20% 240,000 8% You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commence operations. They are identical except for their use of debt (wa) and the interest rates on their debt--High uses more debt and thus must pay a higher interest rate. Both companies are small, so they are not subject to the interest deduction limitation. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh - EPSLow? Do not round your intermediate calculations. Applicable to Both Firms Capital EBIT Tax rate a. $3.23 Ob. $3.59 c. $2.70 d. $2.82 Oe. $2.52 $1,000,000 $620,000 25% Firm High's Data Wd Shares Int. rate 70% 90,000 10% Firm Low's Data Wd Shares Int. rate 20% 240,000 8%

Answer rating: 100% (QA)

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