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

Problem: (a) What are the main functions of the Bank of Mauritius? Give short comments on each function. (b) The Repo rate is an instrument of monetary policy for the Bank

Duke Power Corporation has $500 million (face value) of zero-coupon bonds, which will provide 6% return to the bondholders and will mature after 10 years. The stockholders of the c

Do mergers result in layoffs? A: Overall employment in the banking industry actually has increased slightly over the last ten years. Some mergers do result in layoffs. However,

differentiate between allocative efficiency and price efficiency

Determinants of growth - Profit Margin Dividend Policy   Financial Policy Total asset Turnover

In this paper, we propose new forecasting methods based on advance demand information, and perform a case study to compare them to existing ones based on advance demand information

Problem (a) The yields to maturity on five zero-coupon bonds are given below:                    Years to Maturity                 Yield (%)

a) Explain what you understand by ‘Branding'? b) A ‘Corporate identity' is often viewed as being composed of three parts; state them giving two examples of each. c) ‘Corpo

Question 1: (a) What are the competing theories which have been put forward to explain the term structure of interest rates? Which theories do the evidence tend to support?