Chitown has $20 million in assets. it is considering a 50 -percent debt/asset ratio vs.its current...

Chitown has $20 million in assets. it is considering a 50 -percent debt/asset ratio vs.its current 20% debt/asset ratio. Debt carries interest charges of 12 percent and shares sell for $20 per share.

A. What is the number of shares under each plan?

B. assuming a 40 - percent tax rate, find the level of EBIT at which both plans will have the same EPS?

Solutions

Expert Solution

jeff jeffy answered 7 months ago

Next > < Previous

Related Solutions

The Lopez-Portillo Company has $11.8 million in assets, 80 percent financed by debt and 20 percent...

The Lopez-Portillo Company has $11.8 million in assets, 80 percent financed by debt and 20 percent financed by common stock. The interest rate on the debt is 14 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $24 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 17 percent! Under Plan B, only new common stock...

If a company has a ROE of 20 percent, and a debt ratio of 25 percent,...

If a company has a ROE of 20 percent, and a debt ratio of 25 percent, what is its return on total assets (ROA)? A. 16.7% B. 26.7% C. 5% D. 15% E. 100%

Gates Appliances has a return-on-assets (investment) ratio of 22 percent. a. If the debt-to-total-assets ratio...

Gates Appliances has a return-on-assets (investment) ratio of 22 percent. a. If the debt-to-total-assets ratio is 50 percent, what is the return on equity?

1. Quick Ratio= current assets-inventories/ current liabilities 2. Debt to Assets ratio= total debt/total assets 3....

1. Quick Ratio= current assets-inventories/ current liabilities 2. Debt to Assets ratio= total debt/total assets 3. Earnings Per Share (EPS)=total earnings/outstanding shares (must first solve net income-preferred divideneds= total earnings) 4. Net Income (Net profit)=total revenues-total expenses I need help finding the answer to these equations for Target Corporation for 2015 and 2016. please refer to the links for the 10k reports for the company. 2015- https://corporate.target.com/_media/TargetCorp/annualreports/2015/pdfs/Target-2015-Annual-Report.pdf 2016- https://corporate.target.com/_media/TargetCorp/annualreports/2016/pdfs/Target-2016-Annual-Report.pdf?ext=.pdf

1. An MNC has total assets of $ 100 million and debt of $ 20 million....

1. An MNC has total assets of $ 100 million and debt of $ 20 million. The firm's cost of pretax debt is 12 percent, and its equity financing cost is 15 percent. The MNC has a corporate tax rate of 20 percent. What is the capital cost of this company? 2. Discuss the pros and cons of an MNC that has a centralized cash manager that handles all investments and loans of all MNC affiliates versus each affiliate that...

A firm has a long-term debt–equity ratio of .4. Shareholders’ equity is $1 million. Current assets...

A firm has a long-term debt–equity ratio of .4. Shareholders’ equity is $1 million. Current assets are $200,000, and total assets are $1.5 million. If the current ratio is 2.0, what is the ratio of debt to total long-term capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Debt to long-term capital ____ % 28.6% and 28.57% is not a correct answer

Q: 1- A company has total assets of $26 million of which the debt ratio is...

Q: 1- A company has total assets of $26 million of which the debt ratio is 50%. The company has fixed assets of $16 million, a current ratio of 2.5 times, has preferred stocks of $3 million, and reported a net income available to common stockholders of $14 milljon. a. Calculate current liabilities. b. Calculate common stockholders equity. c. Calculate return on equity (ROE) 2- A firm has net sales of $9,500, cost of goods sold of $3,000, depreciation expense...

The Lopez-Portillo Company has $10.3 million in assets, 70 percent financed by debt and 30 percent...

The Lopez-Portillo Company has $10.3 million in assets, 70 percent financed by debt and 30 percent financed by common stock. The interest rate on the debt is 12 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $16.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 14 percent! Under Plan B, only new common stock...

The Lopez-Portillo Company has $12.3 million in assets, 70 percent financed by debt and 30 percent...

The Lopez-Portillo Company has $12.3 million in assets, 70 percent financed by debt and 30 percent financed by common stock. The interest rate on the debt is 8 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $26.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 11 percent! Under Plan B, only new common stock...

The Lopez-Portillo Company has $10.1 million in assets, 90 percent financed by debt and 10 percent...

The Lopez-Portillo Company has $10.1 million in assets, 90 percent financed by debt and 10 percent financed by common stock. The interest rate on the debt is 14 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $15.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 16 percent! Under Plan B, only new common stock...

Subjects