Black Berry Farms and Pea Pod Farms are each able to generate EBIT of $150,000. The...

  

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Black Berry Farms and Pea Pod Farms are each able to generate EBIT of $150,000. The separate capital structures for Black Berry and Pea Pod are presented below. Black Berry Реa Pod Debt e 10% $800,000 700, e00 Debt a 10% Common stock $400, 000 1,100,000 Common stock Total $1,500,eee Total $1,500, 000 Common shares 140,000 Common shares 220,000 a. Compute EPS for both firms (assume a 40 percent tax rate) (Round the final answers to 2 decimal places.) Black Berry Pea Pod EPS b. Assuming a P/E ratio of 20 for each firm, what would be each firm's share price? (Round your intermediate calculations and final answers to2 decimal places.) Black Berry Pea Pod Share price C. Assume the P/E ratio would be 15 for the riskler company in terms of heavy debt utilization in the capital structure and 26 for the less risky firm. What would the share price now be for each firm? (Round your intermediate calculations and final answers to 2 decimal pleces.) Black Berry Pea Pod Share price Black Berry Farms and Pea Pod Farms are each able to generate EBIT of $150,000. The separate capital structures for Black Berry and Pea Pod are presented below. Black Berry Реa Pod Debt e 10% $800,000 700, e00 Debt a 10% Common stock $400, 000 1,100,000 Common stock Total $1,500,eee Total $1,500, 000 Common shares 140,000 Common shares 220,000 a. Compute EPS for both firms (assume a 40 percent tax rate) (Round the final answers to 2 decimal places.) Black Berry Pea Pod EPS b. Assuming a P/E ratio of 20 for each firm, what would be each firm's share price? (Round your intermediate calculations and final answers to2 decimal places.) Black Berry Pea Pod Share price C. Assume the P/E ratio would be 15 for the riskler company in terms of heavy debt utilization in the capital structure and 26 for the less risky firm. What would the share price now be for each firm? (Round your intermediate calculations and final answers to 2 decimal pleces.) Black Berry Pea Pod Share price

Answer rating: 100% (QA)

Computation of EPS a Particulars Black berry Pea pond EBIT less interest 10 EBT less tax ... View the full answer