Today, Reliable Gearing is fully equity financed. It has 12,000 shares of stock outstanding, which are selling for $100 per share. The firm is considering a capital restructuring. The low debt plan calls for a $220,000 debt issue with the proceeds to be used to buy back shares. The high debt plan would swap $420,000 of debt for equity. The debt will pay an interest rate of 12%. The company does not pay taxes.

a.	What will be the debt to equity ratio if he borrows $220,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

debt ratio

b.	If earnings before interest and taxes (EBIT) is $130,000, what will earnings per share (EPS) be if Reliable borrows $220,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

EPS

ps

C.	What will the EPS be if he borrows $420,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

EPS

ps

Answer rating: 100% (QA)

a The debt to equity ratio if Reliable borrows 220000 will be Debt to equity ratio Total debt Total ... View the full answer