1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Degger [83]
3 years ago
15

You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commen

ce operations. They are identical except for their use of debt (wd) and the interest rates on their debt--High uses more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh - EPSLow?
Applicable to Both Firms Firm High's Data Firm Low's Data Capital $3,000,000 wd 70% wd 20%EBIT $500,000 Shares 90,000 Shares 240,000Tax rate 35% Int. rate 12% Int. rate 10%
Business
1 answer:
ch4aika [34]3 years ago
4 0

Answer:

$0.60

Explanation:

Computation of Firm High's EPS

Profit before Tax (PBT) = EBIT - Interest on debt

= 500,000 - (12% * (70% * 3,000,000)) (Firm High's use of debt is 70%)

= 500,000 - (12%*2,100,000)

= 248,000

Earnings = PBT - tax = 248,000 - (35% * 248,000)

= 161,200

Given 90,000 shares, the EPS = 161,200/90,000 = $1.79.

Computation of Firm Low's EPS

Profit before Tax (PBT) = EBIT - Interest on debt

= 500,000 - (10% * (20% * 3,000,000)) (Firm Low's use of debt is 20%)

= 500,000 - (10%*600,000)

= 440,000

Earnings = PBT - tax = 440,000 - (35% * 440,000)

= 286,000

Given 240,000 shares, the EPS = 286,000/240,000 = $1.19.

Therefore, EPSHigh - EPSLow = 1.79 - 1.19 = $0.60.

You might be interested in
4. Labour Institutions Act(10MKS)
lord [1]

Answer:

  • Reduce discrimination.
  • Reduce exploitation.
  • Reduce inequality/ poverty.
  • Increase productivity.
  • Economic growth.

Explanation:

It is necessary for the government to regulate wages because some companies might take advantage of little regulation to get away with many unjust and unethical actions as they chase profits or due to personal bias.

Without government regulation, there would be wage disparity between races and genders so regulation reduces that. Exploitation will also be reduced because companies will not take advantage of unemployment rates to make workers overwork themselves to keep their jobs.

Regulated wages will reduce inequality in social classes as well as poverty rates as people will be paid closer to what they deserve.

Regulated wages will also lead to improved productivity as people will be more encouraged when they are working knowing they are getting paid appropriately so they will work harder.

With people being paid appropriately, they will be able to afford more goods and invest more savings which will lead to growth in the economy.

4 0
3 years ago
Each of the following are advantages of bonds except: multiple choice bonds do not affect owner control bonds require payment of
tresset_1 [31]

Answer:

bonds require payment of periodic interest and par value at maturity bonds.

Explanation:

A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time. The bond issuer are expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.

The disadvantages of bonds are listed below as;

1. Bonds typically require a payment of periodic interest.

2. Bonds require a payment of the principal amount.

3. Bonds can decrease a person's return on equity.

4. The payments of a bond by the bond issuer may become burdensome when cash flow and income are quite low.

4 0
3 years ago
What is the biggest difference in who makes the contributions to 401(k) and IRA retirement plans?
allsm [11]
In a 401k the employer usually matches a percentage and if you are lucky dollar for dollar, where in an IRA it is does an an extra option with a set amount of money usually 2500 or more for each IRA contribution.
5 0
3 years ago
Activity-based costing (ABC) systems ________. A. Unselected have the same cost allocation system as plantwide and departmental
atroni [7]

Answer:

D. have separate cost allocation rates for each activity identified by the company CORRECT

There will be activity cost pool which, will be distribute among the product using different cost driver like machien hours, direct labor hours or other.

Explanation:

A. have the same cost allocation system as plantwide and departmental cost allocation systems

NO If it was, then it would not have a different name

B. have no cost allocation rates for each activity identified by the company

If we don't have rates to distrubte cost then, the allocation will be arbitrary

C. have combined cost allocation rates for each activity identified by the company

each should have different base cost driver if not, then they aren't different and should be combined.

4 0
3 years ago
Search engines generate revenue through pay-per-click (each time a user clicks a link to a retailer’s website); pay-per-call (ea
Anettt [7]

Answer:

pay-per-click (each time a user clicks a link to a retailer’s website).

Explanation:

Pay-per-click is the cost stipulated by online survey platforms for each click on a sponsored ad.

Popularized by Google AdWords, this is one of the most used metrics for digital marketing, mainly because of the ease of having measurable digital advertising efforts.

The great advantages of this metric is the possibility of measuring and monitoring the number of users who will click on your link, making it more effective to analyze the impact that your business media has on people.

6 0
3 years ago
Other questions:
  • Competitive balance is when it is used in conjunction with a ______.
    8·1 answer
  • g: have an annual coupon rate of 8 percent and a par value of $1,000 and will mature in 20 years. If you require a 7 percent ret
    9·1 answer
  • 1. Assuming that crowding out is not an issue, if Congress increases business taxes at the same time that the Federal Reserve co
    7·1 answer
  • An externality is an intangible effect of production and purchases.<br> TRUE<br> FALSE
    8·1 answer
  • Name3 Parts of a sewing machine​
    7·2 answers
  • Assume Baldwin Corp. is downsizing the size of their workforce by 15% (to the nearest person) next year from various strategic i
    7·1 answer
  • If the recent financial crisis raises awareness about the dangers of not saving, leading to an increase in overall savings rates
    14·2 answers
  • Work Survival skills include?
    11·1 answer
  • A method to determine market risk by using the betas of single-product companies ina given industry
    8·1 answer
  • What is legal citizenship defined as
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!