User Account

All Pages

Calculate earnings per share and eps

Assignment Help Operation Management
Reference no: EM131176356

Kaelea, Inc., has no debt outstanding and a total market value of $106,000. Earnings before interest and taxes, EBIT, are projected to be $9,700 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 22 percent higher. If there is a recession, then EBIT will be 33 percent lower. Kaelea is considering a $30,600 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 5,300 shares outstanding. Assume Kaelea has a tax rate of 30 percent. Requirement 1: (a) Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) EPS Recession $ Normal $ Expansion $ (b) Calculate the percentage changes in EPS when the economy expands or enters a recession. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.) %ΔEPS Recession % Expansion % Requirement 2: Assume Kaelea goes through with recapitalization. (a) Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) EPS Recession $ Normal $ Expansion $ (b) Calculate the percentage changes in EPS when the economy expands or enters a recession. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) %ΔEPS Recession % Expansion %

Reference no: EM131176356

Questions Cloud

Marketing survey to determine the viability of the product : Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $127,000 for a marketing survey to determine the viability of the product. Calculate the Time 0 cash flow for this project.
What kind of valuation methods should pinewood apply : A large forest industry company Pinewood is considering buying a smaller company White River which has two pulp mills and a significant forest area. What kind of valuation methods should Pinewood apply when determining its purchase price offer to the..
Initial cash outlay required to replace existing fleet : The Queensland Land and Cattle Company (QL&CC) is one of the largest cattle-buyers in the country. It has buyers at all the major cattle auctions throughout eastern Australia who buy on the company's behalf and then have cattle shipped to Longreach, ..
Calculate return on equity and ROE : Kaelea, Inc., has no debt outstanding and a total market value of $106,000. Earnings before interest and taxes, EBIT, are projected to be $9,700 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 22 perc..
Calculate earnings per share and eps : Kaelea, Inc., has no debt outstanding and a total market value of $106,000. Earnings before interest and taxes, EBIT, are projected to be $9,700 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 22 perc..
Calculate the economy-wide desired excess reserves ratio : The questions on this homework deal with an economy called Economica. This economy contains a total of two banks; Calculate the economy-wide desired excess reserves ratio. Assume for the purposes of this question that these are the only two banks in ..
Write out the security market line equation : Write out the Security Market Line (SML) equation and use it to calculate the required rate of return on each alternative. Compare the expected rates of return with the required rates of return. How do these perform against your predictions? Does the..
Which variables are most important in terms of their effects : Upscale Toddlers, Inc., manufactures children’s clothing, including such accessories as socks and belts. The company has been in business since 1955, mainly supplying private label merchandise to large department stores. Which variables are most impo..
Project affected by international cultural or ethics issues : Discuss any additional culture and ethics considerations that one has to take into account in dealing with international projects. Based on personal knowledge, or experience, or relevant case studies describe a project affected by international cultu..

Reviews

Write a Review

Operation Management Questions & Answers

  Many firms fail when they enter into strategic alliances

Many firms fail when they enter into strategic alliances with firms that link up with companies based in other countries. What are some reasons for this failure? Provide an example.

  Make link between decentralization and efficiency less clear

It is worth contemplating for a moment a very simple and commonplace instance of the action of the price system to see what precisely it accomplishes. Some people (e.g., Hayek) argue that decentralization of economic decisions in the economy leads to..

  Describe the five phases of a project

Determine which project might be implemented and why (e.g. feasibility study, breakeven analysis, etc). Describe the five phases of a project

  Midway through the project your design

Midway through the project your design and production people realize that a 75 percent improvement curve is more appropriate

  Differences between traditional and relationship selling

Based on the key differences between traditional and relationship selling, which type of sales approach would you use as a salesperson? Do the different approaches require different personal strengths or attributes?

  Models of operations and information management

Critically analyse the theory, concepts and models of operations and information management and demonstrate an understanding of the strategic importance of information management in global organisations.

  How the role of human resources today can provide value

Analyze and discuss how the role of human resources today can provide value as a strategic partner in an organization.

  Give your opinions on what you think the difference is

give your opinions on what you think the difference is between law and ethics. do not research this. this is your

  Congress pass the laws and formulate policies

"Most people believe that the president or Congress pass the laws and formulate policies based on their perceptions of what the public wants and needs. Often it is the result of research or the pressure of groups and individuals lobbying for or again..

  Compute the total cost of ordering and carrying clay pots

Garden Variety Flower Shop uses 1000 clay pots a month. The pots are purchased at $3 each. Annual carrying costs per pot are estimated to be 25% of cost, and ordering costs are $25 per order.

  Estimating lowest cost

An organization is considering three process configuration options. There are two different intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month, and variable costs of $10 per uni..

  What is the bottleneck time of the system

The three-station work cell illustrated in Figure S7.7, has a product that must go through one of the two machines at station 1 (they are parallel) before proceeding to station 2. what is the bottleneck time of the system? what is the bottleneck stat..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd