1
answer
0
watching
501
views
28 Sep 2019
You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commence operations. They are identical except for their use of debt (wd) and the interest rates on their debt--High uses more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh â EPSLow? Do not round your intermediate calculations.
Applicable to Both Firms Firm High's Data Firm Low's Data Capital $3,000,000 wd 70% wd 20% EBIT $565,000 Shares 90,000 Shares 240,000 Tax rate 35% Int. rate 12% Int. rate 10%
â
a. $01.16
b. $00.80
c. $00.89
d. $01.07
e. $00.67
You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commence operations. They are identical except for their use of debt (wd) and the interest rates on their debt--High uses more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh â EPSLow? Do not round your intermediate calculations.
| Applicable to Both Firms | Firm High's Data | Firm Low's Data | |||||
| Capital | $3,000,000 | wd | 70% | wd | 20% | ||
| EBIT | $565,000 | Shares | 90,000 | Shares | 240,000 | ||
| Tax rate | 35% | Int. rate | 12% | Int. rate | 10% | ||
â
| a. | $01.16 | |
| b. | $00.80 | |
| c. | $00.89 | |
| d. | $01.07 | |
| e. | $00.67 |
Casey DurganLv2
28 Sep 2019