The Plastic Corporation has a current capital structure consisting of $150,000 of 15% debt and 3,500 shares

Fantastic news! We've Found the answer you've been seeking!

Question:

The Plastic Corporation has a current capital structure consisting of $150,000 of 15% debt and 3,500 shares of common stock. The tax rate is 40%

a. Determine the earnings per share (EPS) when EBIT is $75,000 and $99,500.

b. Calculate the degree of financial leverage (DFL) using EBIT of $75,000 as a base.

c. What is the meaning The Plastic Corporation’s DFL?

Related Book For answer-question

Principles Of Managerial Finance

ISBN: 978-0136119463

13th Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

See More Books

Posted Date: Jun 24, 2022 12:38 AM

See More Questions

Assume that you have just been hired by Adams, Garitty, and Evans (AGE), a consulting firm that specializes in analyses of firms capital structures and dividend policies. Your boss has asked you to...
The Lopez-Portillo Company has $10.6 million in assets, 80 percent financed by debt, and 20 percent financed by common stock. The interest rate on the debt is 9 percent and the par value of the stock...
The Lopez-Portilla Company has $10 million in assets, 80 percent financed by debt and 20 percent financed by common stock. The interest rate on the debt is 15 percent, and the stock book value is $10...
Simplify the expressions in Problems 3138. (3x - 1) (x + 3x - 2)
The year-end adjusted trial balance of Hilltoppers Corporation included the following account balances: Cash, $5,000; Equipment, $17,000; Accounts Payable, $3,000; Common Stock, $11,000; Retained...
What is HRM evaluation? Why is it justified?
A 40-lb weight is dropped from rest at a height of $h=2 \mathrm{ft}$ onto the center of the W10 $\times 15$ structural A992 steel beam. Determine the maximum bending stress in the beam. A -5 ft-...
NewLife Hospital purchased a special X-ray machine. The machine, which cost $623,120, was expected to last ten years, with an estimated residual value of $63,120. After two years of operation (and...
Iron Sheets Company had the following information for the month of June 2021. Sales Purchases Sales and administrative expenses V Factory overhead V Direct labor Shs. 257,000 92.000 79,000 37,000...
Legendary for his business and investment acumen, Warren Buffett is frequently called the Oracle of Omaha after his birthplace in Omaha, Nebraska. As one of the worlds wealthiest business...
On January 1, 2019, Yankees Corp. bought 30,000 shares of the available 100,000 common shares of Red Sox Inc., a publicly-traded firm. This acquisition provided Yankees with significant influence....
Explain what we mean by ideaware.
Read the code segment and fill in blank #26. 1. predLoc == NULL 2. location == NULL 3. predLoc == location 4. predLoc->next == NULL 5. answer not shown 4 Class Unsorted Type { public: //all the...
A List ADT is to be extended by the addition of function Tail, which has the following precondition and postcondition: 1. Will this addition be easy to implement in the arraybased sortedType?...
Name four tools used in software design.
Give a Big-O estimate of the run time for the functions you wrote in Exercises 5 and 6. Exercise 5 The specifications for the Unsorted List ADT state that the item to be deleted is in the list. 1....
The temperature at the inner and outer surfaces of a boiler wall made of 35 mm thick steel and covered with an insulating material of 20 mm thickness are 450 C and 700 C respectively. If the thermal...
Consider the setup in Problem 16. Show that the relative speed of the ball and the point of contact on the stick is the same before and immediately after the collision. (This result is analogous to...
What is the cause of uncertainty in the cash budget, and what two techniques can be used to cope with this uncertainty?
Marla's Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table. Marla's Cafe has sufficient authorized but unissued shares...
Complex Systems has an outstanding issue of $1,000-parvalue bonds with a 12% coupon interest rate. The issue pays interest annually and has 16 years remaining to its maturity date. a. If bonds of...
A suspension system is being designed for a $1000 \mathrm{~kg}$ vehicle. A first model of the system used in the design process is a spring of stiffness $k$ in parallel with a viscous damper of...
Determine the steady-state amplitude of motion of the $5-\mathrm{kg}$ block. The coefficient of friction between the block and surface is 0.11 . (See Figure P4.73.) y(t) 3.2 x 10 sin 220 m 1 10 N/m...
A $1000 \mathrm{~kg}$ turbomachine has a rotating unbalance of $0.1 \mathrm{~kg} \cdot \mathrm{m}$. The machine operates at speeds between 500 and $750 \mathrm{rpm}$. What is the maximum...

The Plastic Corporation has a current capital structure consisting of $150,000 of 15% debt and 3,500 shares

Question:

Expert Answer:

a Computation of the earnings per shareEPSWe have Particulars EBIT ... View the full answer

Principles Of Managerial Finance

Students also viewed these finance questions