EPS, Debt-to-Equity, Breakeven point LexMart maintains a debt-to-equity ratio of 1.0 regardless of whether the firm...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
EPS, Debt-to-Equity, Breakeven point LexMart maintains a debt-to-equity ratio of 1.0 regardless of whether the firm experiences expansion or contraction. At the present time, LexMart has $1,000 par value bonds outstanding that pay 7% annual interest. The firm also has 2.6 million shares of common stock outstanding that sells for $22 per share. a. Based on LexMart's current annual NOP of $21,000,000 and its corporate tax rate of 20%, what is its EPS? b. If LexMart would like to finance a $60 million expansion while maintaining it's current debt-to-equity ratio of 1.0, how many bonds at $1,000 per bond and shares of stock will it have to sell to pay for the expansion? c. After the expansion, what level of annual NOP will LexMart have to generate to maintain its current level of EPS? a. LexMart's current EPS is $ (Round to three decimal places.) ... EPS, Debt-to-Equity, Breakeven point LexMart maintains a debt-to-equity ratio of 1.0 regardless of whether the firm experiences expansion or contraction. At the present time, LexMart has $1,000 par value bonds outstanding that pay 7% annual interest. The firm also has 2.6 million shares of common stock outstanding that sells for $22 per share. a. Based on LexMart's current annual NOP of $21,000,000 and its corporate tax rate of 20%, what is its EPS? b. If LexMart would like to finance a $60 million expansion while maintaining it's current debt-to-equity ratio of 1.0, how many bonds at $1,000 per bond and shares of stock will it have to sell to pay for the expansion? c. After the expansion, what level of annual NOP will LexMart have to generate to maintain its current level of EPS? a. LexMart's current EPS is $ (Round to three decimal places.) ...
Expert Answer:
Answer rating: 100% (QA)
SOLUTION a To calculate EPS we first need LexMarts net income With an NOP of 21 million and a tax ra... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Last Sale Net Bid Ask Open Int Puts Last Sale Net bid Ask Vol Open Int 16Aug 155.00(1619H155-E) 6.45 0.75 6.95 7.25 9 16Aug 155.00(1619T155-E) 1.18 (0.75) 1.17 1.25 61 4505 16Aug 166.00(1619H160-E)...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
List three specific parts of the Case Guide, Objectives and Strategy Section (See below) that you had the most difficulty understanding. Describe your current understanding of these parts. Provide...
-
Benny sells an apartment building. His adjusted basis for regular income tax purposes is $450,000, and it is $475,000 for AMT purposes. He receives $700,000 from the sale. a. Calculate Bennys gain...
-
A special kind of light bulb emits monochromatic light of wavelength 630 nm. Electrical energy is supplied to it at the rate of 60 W, and the bulb is 93% efficient at converting that energy to light...
-
The diagram shows the sector OAB of a circle with centre O, radius 12 cm and angle 1.2 radians. The line AC is a tangent to the circle with centre O, and OBC is a straight line. The region R is...
-
True or False. A singular point corresponds to a state of equilibrium of the system.
-
Presented below are transactions related to Tom Brokaw, Inc. May 10 Purchased goods billed at $15,000 subject to cash discount terms of 2/10, n/60. 11 Purchased goods billed at $13,200 subject to...
-
A project aims to deliver a 1.5% increase in the local median housing income within 5 years of its end date. The project has a total budget of EUR 4m. This is split into EUR 500k for planning and...
-
Henri of Henris French Cuisine (HFC), a chain of 12 restaurants, is trying to decide if it makes sense to outsource the purchasing function. Currently, Henri employs two buyers at an annual fixed...
-
Burgundy plc is financed through bonds and ordinary shares. The bonds were issued five years ago at a par value of 100 (total funds raised 5m). They carry an annual coupon of 10%, are due to be...
-
Nolan Corp. uses no debt. The weighted average cost of capital is 6.7 percent. The current market value of the equity is $28 million and the corporate tax rate is 21 percent. What is the company's...
-
Suppose the exchange rate between U.S. dollars and Swiss francs is CHF 0.92 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 0.84 euro. What is the cross rate of Swiss...
-
Grossnickle Corporation issued 20-year, noncallable, 9.7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 7.4%. What is the current...
-
A simple loan with a present value of $5500 will be paid off in 5 years. If the interest rate is 7% what will the future payment be?
-
Why should bond investors be cautious when relying on yield to maturity? Is it an accurate measure of rate of return for investors who might not hold their bonds to maturity?
-
Calculate your annualized yield if you buy a T-bill with a 60-day maturity and $40,000 par value for $39,750 and hold it to maturity?
-
Make an argument that Williams had a right to delay the closing until after August 1.
-
Which concept--the business profit concept or the economic profit concept--provides the more appropriate basis for evaluating business operations? Why?
-
Marginal cost pricing, as well as the use of incremental analysis, is looked upon with favor by economists, especially those on the staffs of regulatory agencies. With this encouragement, regulated...
-
In the wake of corporate scandals at Enron, Tyco, and WorldCom, some argue that managers of large, publicly owned firms sometimes make decisions to maximize their own welfare as opposed to that of...
-
Derive the finite difference equations governing the forced longitudinal vibration of a fixedfree uniform bar, using a total of \(n\) mesh points. Find the natural frequencies of the bar, using...
-
Derive the finite difference equations for the forced vibration of a fixed-fixed uniform shaft under torsion, using a total of \(n\) mesh points.
-
Find the first three natural frequencies of a uniform fixed-fixed beam.
Study smarter with the SolutionInn App