Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The...
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Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. Cain Able Debt e 8% Common stock $180,000 360,000 Debt @ 8% Common stock $360,000 180,000 Total $540,000 Total $540,000 Common shares 36,000 Common shares 18,000 a. Compute EPS if EBIT are $36,000, $43,200, and $63,000 (assume a 10 percent tax rate). (Round the final answers to 2 decimal places. Do not leave any empty spaces, input a 0 wherever it is required.) Cain Able EPS at $36,000 EPS at $43,200 EPS at $63,000 24 24 $4 2$ 24 b. What is the relationship between EPS and level of EBIT? 1. Earnings before interest and taxes is less than cost of debt. 2. Earnings before interest and taxes equals cost of debt. 3. Earnings before interest and taxes is greater than cost of debt. (Click to select) (Click to select) (Click to select) c. If the cost of debt went up to 10 percent and all other factors remained equal, what would be the indifference point for EBIT? Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. Cain Able Debt e 8% Common stock $180,000 360,000 Debt @ 8% Common stock $360,000 180,000 Total $540,000 Total $540,000 Common shares 36,000 Common shares 18,000 a. Compute EPS if EBIT are $36,000, $43,200, and $63,000 (assume a 10 percent tax rate). (Round the final answers to 2 decimal places. Do not leave any empty spaces, input a 0 wherever it is required.) Cain Able EPS at $36,000 EPS at $43,200 EPS at $63,000 24 24 $4 2$ 24 b. What is the relationship between EPS and level of EBIT? 1. Earnings before interest and taxes is less than cost of debt. 2. Earnings before interest and taxes equals cost of debt. 3. Earnings before interest and taxes is greater than cost of debt. (Click to select) (Click to select) (Click to select) c. If the cost of debt went up to 10 percent and all other factors remained equal, what would be the indifference point for EBIT?
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Answer rating: 100% (QA)
a CAIN EBIT Interest 8 EBT Tax 10 NI Com Shares EPS 36000 14400 21600 2160 ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-0077454432
14th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
Posted Date:
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