Question: Please, complete parts a, b, c, d and e. EBITEPS and preferred stock Litho-Print is considering two possible capital structures, A and B, shown in
Please, complete parts a, b, c, d and e.
EBITEPS and preferred stock Litho-Print is considering two possible capital structures, A and B, shown in the following table. Assume a 40% tax rate. Source of capital Long-term debt Preferred stock Common stock Structure A Structure B $71,000 at 15.9% coupon rate $46,000 at 14.9% coupon rate $12,000 with an annual dividend of 18.1% $17,000 with an annual dividend of 18.1% 8,100 shares 10,100 shares a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values. b. Graph the two capital structures on the same set of EBIT-EPS axes. c. Discuss the leverage and risk associated with each of the structures d. Over what range of EBIT is each structure preferred? e. Which structure do you recommend if the firm expects its EBIT to be greater than $40,000? Explain. a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values Complete the tables below using $30,000 and $50,000 EBIT: (Round to the nearest dollar. Round the EPS to three decimal places.) Structure A EBIT $ 30,000 Less: Interest $ Net profits before taxes $ Less: Taxes $ $ $ Net profit after taxes Less: Preferred dividends Earnings available for common shareholders EPS (8,100 shares) $ $ Enter any number in the edit fields and then click Check Answer. 9 parts remaining Clear All Check Answer EBITEPS and preferred stock Litho-Print is considering two possible capital structures, A and B, shown in the following table. Assume a 40% tax rate. Source of capital Long-term debt Preferred stock Common stock Structure A Structure B $71,000 at 15.9% coupon rate $46,000 at 14.9% coupon rate $12,000 with an annual dividend of 18.1% $17,000 with an annual dividend of 18.1% 8,100 shares 10,100 shares a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values. b. Graph the two capital structures on the same set of EBIT-EPS axes. c. Discuss the leverage and risk associated with each of the structures d. Over what range of EBIT is each structure preferred? e. Which structure do you recommend if the firm expects its EBIT to be greater than $40,000? Explain. a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values Complete the tables below using $30,000 and $50,000 EBIT: (Round to the nearest dollar. Round the EPS to three decimal places.) Structure A EBIT $ 30,000 Less: Interest $ Net profits before taxes $ Less: Taxes $ $ $ Net profit after taxes Less: Preferred dividends Earnings available for common shareholders EPS (8,100 shares) $ $ Enter any number in the edit fields and then click Check Answer. 9 parts remaining Clear All Check
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