1
answer
0
watching
572
views
28 Sep 2019
Reliable Gearing currently is all-equity-financed. It has 19,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $290,000 with the proceeds used to buy back stock. The high-debt plan would exchange $490,000 of debt for equity. The debt will pay an interest rate of 10%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $290,000?
. If earnings before interest and tax (EBIT) are $200,000, what will be earnings per share (EPS) if Reliable borrows $290,000?
What will EPS be if it borrows $490,000?
Reliable Gearing currently is all-equity-financed. It has 19,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $290,000 with the proceeds used to buy back stock. The high-debt plan would exchange $490,000 of debt for equity. The debt will pay an interest rate of 10%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $290,000?
. | If earnings before interest and tax (EBIT) are $200,000, what will be earnings per share (EPS) if Reliable borrows $290,000?
|
Tod ThielLv2
28 Sep 2019