EBIT, Corporate Finance

Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000. (To ease the calculation, assume no income tax.)

What is the operating income (EBIT) for both firms?
What are the earnings after interest?
If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b.
Why are the percentage changes different?
Posted Date: 10/22/2012 4:48:04 PM | Location : United States







Related Discussions:- EBIT, Assignment Help, Ask Question on EBIT, Get Answer, Expert's Help, EBIT Discussions

Write discussion on EBIT
Your posts are moderated
Related Questions
the managing directors of three profitable listed companies discussed their company''s dividend policies. company A has deliberately paid no dividends for the past five years. comp


You are a ceo of a sotware firm that has limited access to debt equity markets. The average return on last year projects is 28 % . and cost of capital is 12%. would npv pr Irr be

you buy a car for ths 10000000 to be repaid in 3 years, with annua interest of 12%. preapare a loan amortization table

National Australia Bank is listed on the Australian Securities Exchange with code NAB. The company has 2.2731 billion shares outstanding and the closing price on 7 Sept 2012 was $2

This assignment is the third part of your course project. Using the two companies that are from the same industry, complete the following: Required: 1.Find their latest annual r

On December 31, 2009, the Real Weapons Factory reported total stockholders' equity of $447,200. On that date, total contributed capital was $360,000. During 2009, the firm had tota

This is an accounting term which is applicable to stockholders of closely going businesses. Accumulated earnings and profits are a company's net profits after subtracting distribut

Question: You have been appointed as the treasurer of Dockers International, an automobile firm with many subsidiaries abroad. The management of Dockers International is relati