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The Tanenbaum Tea Company wants to show the stock market an EPS of $3 per share,...

The Tanenbaum Tea Company wants to show the stock market an EPS of $3 per share, but doesn't expect to be able to improve profitability over what is reflected in the financial plan for next year. The plan is partially reproduced below.

Tanenbaum Tea Company
Financial Projection 20X1
($000)
EBIT $18,250 Debt $12,000
Interest (@12%) 1,440                 Equity 98,000
EBT $16,810                 Capital $110,000
Tax (38%) 6,388                
EAT $10,422                 Number of shares = 3,700,000

Tanenbaum's stock sells at book value.

Will trading equity for debt help the firm achieve its EPS goal?

What debt level will produce the desired EPS? Enter your answer in whole thousands. For example, an answer of $1.2 thousand should be entered as 1.2, not 1200. If there is no answer leave the blank field. Do not round intermediate calculations.
$ ___ thousand

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Please upvote if the ans is helpful. Incase of doubt ,do comment. Thanks.

jeff jeffy answered 1 year ago
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