What are the break-even levels of ebit, Accounting Basics

Assignment Help:

John is considering the best capital structure for his firm. Suppose there are two capital structures for him to choose from. Structure A would have 7,000 shares of stock and $160,000 in debt. Structure B would have 5,000 shares of stock and $240,000 in debt. The interest rate on the debt is 10%.

a Ignoring taxes, compare both of these structures to an all-equity structure, assuming that EBIT will be $39,000. The all-equity structure would have 11,000 shares of stock outstanding. Which of the three structures has the highest EPS? The lowest?

b In part (a), what are the break-even levels of EBIT for each structure as compared to that for an all-equity structure? Is one higher than the other? Why?

c Ignoring taxes, when will EPS be identical for Structures A and B?

d Repeat parts (a), (b) and (c) assuming that the corporate tax rate is
40%. Are the break-even levels of EBIT different from before? Why
or why not?


Related Discussions:- What are the break-even levels of ebit

Calculate the cutoff price and gross benefit, Bill is an avid angler. His f...

Bill is an avid angler. His favorite fishing location is Willow Lake, which supports year-round sport fishing. His monthly demand function for fishing at Willow Lake is given by x

Accounting theory assignment, Just i need a news about public interest theo...

Just i need a news about public interest theory which is after 1 Mar 2013 for my assignment.

Inter company transaction in account receivable, How to define Inter compan...

How to define Inter company Transaction in Account Receivable? Ans) Intercompany transactions are those transactions that takes place among two or more entities of the similar g

What is the mission of the accounting and finance, what is the mission of t...

what is the mission of the Accounting and Finance Functional Area

Show unearned revenues, Q. Show Unearned revenues? Unearned revenues- r...

Q. Show Unearned revenues? Unearned revenues- revenues received in advance consequence when a company receives payment for goods or services before earning the revenue such as

Cash $10, Cash $10,000 Accounts Payable $7,000 Accounts Receivable $6,400...

Cash $10,000 Accounts Payable $7,000 Accounts Receivable $6,400 Mortgage Payable $65,000 Supplies $1,500 Long-term Debt $36,000 Building $150,000 Notes Payable $9,000 Equip

accounts receivable for small busines, How vital does Accounts receivable ...

How vital does Accounts receivable for small business and why?        Ans) Accounts Receivables help small businesses by giving short-term liquidity. Also continued sales on cre

Define accounting and briefly explain the accounting concept, 1. (a) Define...

1. (a) Define Accounting. Briefly explain the accounting concepts which guide the accountant at the recording stage. (b) "Ledger is said to be the principal book entry and the t

The formula for computing additional paid-in capital, The formula for compu...

The formula for computing additional paid-in capital in excess of par is shares of stock times Saturday

Balance sheet concepts, THE BALANCE SHEET CONCEPTS According to Howard,...

THE BALANCE SHEET CONCEPTS According to Howard, a Balance Sheet might be definite as - 'a statement which reports the principles owned by the enterprise and the assert of the c

Write Your Message!

Captcha
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!

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