Financial breakeven point The following table contains a list of selected information from the financial statements of
Question:
Financial breakeven point
The following table contains a list of selected information from the financial statements of Liverpool Inc.
Select Financial Data
Long-term debt$437.5 millionBorrowing rate8%Interest expense$35 millionTax rate40%Preferred stock dividends$5 millionEarnings per share$0
Based on the preceding information, what is the EBIT that Liverpool Inc. must achieve in order to hit its financial breakeven point?
445.83
495.83
49.83
43.33
47.66
After further analysis, Liverpool Inc. has determined that it will not be issuing preferred dividends as it had previously planned. What sort of additional decision-making flexibility will this offer the managers of Liverpool Inc., while still allowing the company to meet its financial breakeven point?
Liverpool Inc. could borrow an additional $104 million at its current borrowing rate to finance expansion.
Liverpool Inc. could repurchase 20% of its outstanding common stock.
Liverpool Inc. could borrow an additional $124.8 million at its current borrowing rate to finance expansion.
Liverpool Inc. could pay off 75% of its long-term debt.
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann, David Anderson, Dennis Sweeney, Thomas Williams