Zheng sens chinese take out had earnings before interest

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Zheng Sen's chinese take out had earnings before interest and taxes of 4,000,000 last year. The firm has a marginal tax rate of 40% and currently has the following capital structure:                                                          

Long term debt at 12% with an amount of 8,000,000 and total capital percentage of 25%                                                
Preferred stock at 14% with an amount of 800,000 and total capital percentage of 25%                                                   
Common stock equity                                                          
2000000 shares outstanding for an amount of 16,000,000 and tot cap percentage of 50                                                 

a. Calculate the firm's after tax ROE and EPS.                                                          
b. If the firm retires 4,000,000 of preferred stock using the proceeds from an equal increase in long term debt, what would have been the after tax ROE and EPS?                                                          
c. If the firm retires 4,000,000 of preferred stock using the proceeds from the

Reference no: EM13394160

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