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andrew11 [14]
3 years ago
8

Franklin Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Un

der Plan I, the company would have 170,000 shares of stock outstanding. Under Plan II, there would be 120,000 shares of stock outstanding and $2.21 million in debt outstanding. The interest rate on the debt is 7 percent and there are no taxes.
If EBIT is $450,000, what is the EPS for each plan?
Business
1 answer:
Ugo [173]3 years ago
3 0

Answer:

The answer is given below;

Explanation:

Plan  II    EPS=Net Income/Weighted Average shares outstanding

                    =$450,000-(2,210,000*7%)/120,000=$2.46

Plan I    =$450,000/170,000=$2.64

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No gain or loss is reported when treasury stock is reissued because GAAP does not consider transactions between a corporation an
ikadub [295]

Answer:

A) True

Explanation:

The GAAP doesn't allow corporations to record any income or loss from investments in its own stock (repurchase and reissuing) since transactions involving the owners of the corporation cannot result in profit or losses. Shareholders are the owners of the corporation and it cannot make a profit or loss by selling to itself.

Reissuing or repurchasing of stock only affects the balance sheet, like all transaction involving stocks.

5 0
3 years ago
Quantitative Problem 1: Assume today is December 31, 2017. Barrington Industries expects that its 2018 after-tax operating incom
ziro4ka [17]

Answer:

$29.630

Explanation:

For computation of stock price first we need to follow some steps which is shown below:-

Free cash flow = EBIT (1 - T) + Depreciation - Capital expenditure - Working capital

= $450 million + $65 million - $110 million - $30 million

=  $375 million

Value of firm = Free cash flow ÷ (WACC - Growth)

= $375 million ÷ (9% - 4.5%)

= $375 million ÷ 0.045

= $8,333.33 million

Value of equity = Value of firm - Value of debt

= $8,333.33 million - $3,000 million

= $5,333.33 million

Stock price = Value of equity ÷ Outstanding shares

= $5,333.33 million ÷ 180 million

= $29.630

3 0
4 years ago
Why should compensation systems be equitable? How can an organization design an equitable compensation system?
gtnhenbr [62]

Answer:

According to society for human resource management Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are competitive externally and equitable internally.

Explanation:

A well-designed salary structure allows management to reward performance and skills development while controlling overall base salary cost by providing a cap on the range paid for particular jobs or locations.

Hope this helps

6 0
3 years ago
Which one of the following statements concerning the balance sheet is correct? Total assets equal total liabilities minus total
Margarita [4]

Answer:  Assets are listed in descending order of liquidity

Explanation:

According to accountant principles, the assets are always listed starting with the most liquid asset. It has the special purpose of helping to the shareholders and company owners to know what assets are easily sold and become in cash flow. The most liquid asset is always the cash, it is the first in the list. Commonly the second asset listed is the inventory, then we have ththe realizable value ( it includes bonds, stocks and other stock market elements), followed by the elements available for sell, at the end we can find listed long term resources including fixed assets and intangible assets.

8 0
4 years ago
A loop of wire carrying a current of 2.0 A is in the shape of a right triangle with two equal sides, each 15 cm long. A 0.7 T un
Akimi4 [234]

Answer:

F =  0.312 N

Explanation:

Given,

Current, I = 2 A

Length of the equal side = 15 cm = 0.15 m

Magnetic field, B = 0.7 T

Magnetic filed is parallel to hypotenuse

θ = 135°

Force on the first side of the triangle

F = i BL \sin \theta

Force on the another side

F = i BL \sin \theta

Resultant magnetic Force

F = 2 \times 2\times 0.7 \times 0.15 \sin 135^0

F =  0.312 N

8 0
3 years ago
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