7200 plus what equals 8342

Ghost, Inc., has no debt outstanding and a total market value of $369,600. Earnings before interest and taxes, EBIT, are project

arlik [135]

Answer:

Ghost Inc.

A1.

Earnings Per share (EPS)

EPS in normal projection is $4.61 per share

EPS in an expansion is $5.31 Per share

EPS in a recession is $3.51 Per share

A2.

Changes to EPS in an expansion is +15.18%

Changes to EPS in a recession is -23.86%

B1.

Earnings Per share (EPS)

EPS in normal projection is $7.23 per share

EPS in an expansion is $8.62 Per share

EPS in a recession is $5.01 Per share

B2.

Changes to EPS in an expansion is +19.23%

Changes to EPS in a recession is -30.71%

Step-by-step explanation:

Underlying Information:

Earnings before interest and taxes, EBIT projections = $51,000

Expansionary EBIT projections = $51,000 x (100% + 15%) = $58,650

Recessionary EBIT projections = $51,000 x (100% -24%) = $38,760

Tax Rate = 24%

Market to Book Ratio = 1.0

Stock Price is constant.

Solution to A1.

Scenario 1 (Projected Earnings)

Earnings Per Share (EPS) = Net Income (Earnings after Tax) divided by Outstanding Shares in Issue

Net Income = EBIT minus tax = $51,000 - ($51,000 x 24%)

= $51,000 - $12240

= $38,760

Outstanding shares in issue = 8,400 ordinary Shares

EPS = $38,760 divided by 8,400 shares = $4.61 Per share

Scenario 2 (Projected Earnings in a strong expansion)

Earnings Per Share (EPS) = Net Income (Earnings after Tax) divided by Outstanding Shares in Issue

Net Income = EBIT minus tax = $58,650 - ($58,650 x 24%)

= $58,650 - $14,076

= $44,574

Outstanding shares in issue = 8,400 ordinary Shares

EPS = $44,574 divided by 8,400 shares = $5.31 Per share

Scenario 3 (Projected Earnings in a Recession)

Earnings Per Share (EPS) = Net Income (Earnings after Tax) divided by Outstanding Shares in Issue

Net Income = EBIT minus tax = $38,760 - ($38,760 x 24%)

= $38,760 - $9,302.4

= $29,457.6

Outstanding shares in issue = 8,400 ordinary Shares

EPS = $44,574 divided by 8,400 shares = $3.51 Per share

Solution to A2.

1.Changes to EPS in an expansion = EPS (Expansion) minus EPS (normal projection), all divided by EPS (normal projection)

= (5.31 - 4.61) / 4.61

= +15.18% change during an expansion

2.Changes to EPS in a recession = EPS (Recession) minus EPS (normal projection), all divided by EPS (normal projection)

= (3.51 - 4.61) / 4.61

= -23.86% change during a recession

Underlying Information:

Debt issue = $185,000

Interest on debt issued = 6% = $11,100

Market to Book Ratio = 1.0

Stock Price is constant.

Therefore Share Price = Market Value divided by Outstanding shares in issue = 369,600 / 8400 = $44

This implies our proceeds of $185,000 from debt issue would have repurchased $185,000 divided by $44 = 4,205 ordinary shares

This decision to repurchase its shares indicates the shares outstanding will reduce by 4,205. New outstanding shares will now be 4,195 shares

*Earnings before interest and taxes, EBIT normal projections = $51,000 & Earnings Before Tax (EBT) = $51,000 minus $11,100 (debt interest) = $39,900

*Expansionary EBIT projections = $51,000 x (100% + 15%) = $58,650 & Earnings Before Tax = $58,650 minus $11,100 (debt interest) = $47,550

*Recessionary EBIT projections = $51,000 x (100% -24%) = $38,760 & Earnings Before Tax = $38,760 minus $11,100 (debt interest) = $27,660

Tax Rate = 24%

Solution to B1.

Scenario 1 (Projected Earnings)

Earnings Per Share (EPS) = Net Income (Earnings after Tax) divided by Outstanding Shares in Issue

Net Income = EBT minus tax = $39,900 - ($39,900 x 24%)

= $39,900 - $9,576

= $30,324

Outstanding shares in issue = 4,195 ordinary Shares

EPS = $30,324 divided by 4,195 shares = $7.23 Per share

Scenario 2 (Projected Earnings in a strong expansion)

Earnings Per Share (EPS) = Net Income (Earnings after Tax) divided by Outstanding Shares in Issue

Net Income = EBT minus tax = $47,550 - ($47,550 x 24%)

= $47,550 - $11,412

= $36,138

Outstanding shares in issue = 4,195 ordinary Shares

EPS = $36,138 divided by 4,195 shares = $8.62 Per share

Scenario 3 (Projected Earnings in a Recession)

Earnings Per Share (EPS) = Net Income (Earnings after Tax) divided by Outstanding Shares in Issue

Net Income = EBT minus tax = $27,660 - ($27,660 x 24%)

= $27,660 - $6,638.40

= $21,021.60

Outstanding shares in issue = 4,195 ordinary Shares

EPS = $21,021.60 divided by 4,195 shares = $5.01 Per share

Solution to B2.

1.Changes to EPS in an expansion = EPS (Expansion) minus EPS (normal projection), all divided by EPS (normal projection)

= (8.62 - 7.23) / 7.23

= +19.23% change during an expansion

2.Changes to EPS in a recession = EPS (Recession) minus EPS (normal projection), all divided by EPS (normal projection)

= (5.01 - 7.23) / 7.23

= -30.71% change during a recession

6 0

3 years ago

Footlocker buys sneakers for $60 each and marks up the price by 30% so they can make a profit. What is the selling price of the

pantera1 [17]

Answer:

now it would be $78

4 0

3 years ago

Is 1third =to 1sixth

NNADVOKAT [17]

Answer: No, 1/3 is equal to 2/6

Step-by-step explanation: If you multiply the bottom number, the denominator, and the top number, the numerator, by 2, you will get 2/6 which is equal to 1/3.

3 0

4 years ago

Read 2 more answers

What is 14.1% of the 132 mL rounded to the nearest 10th

Anastasy [175]

132 x 14.1% = 18.612

So 18.612 rounded to 18.6

5 0

3 years ago

A real estate agent has 19 properties that she shows. She feels that there is a 30% chance of selling any one property during a

netineya [11]

Answer:

$P(X \geq 5)=1-P(X$

We can find the individual probabilities:

$P(X=0)=(19C0)(0.3)^0 (1-0.3)^{19-0}=0.00114$

$P(X=1)=(19C1)(0.3)^1 (1-0.3)^{19-1}=0.0092$

$P(X=2)=(19C2)(0.3)^2 (1-0.3)^{19-2}=0.0358$

$P(X=3)=(19C3)(0.3)^3 (1-0.3)^{19-3}=0.0869$

$P(X=4)=(19C4)(0.3)^4 (1-0.3)^{19-4}=0.1491$

And replacing we got:

$P(X \geq 5) = 1-[0.00114+0.009282+0.0358+0.0869+0.149]= 0.7178$

Step-by-step explanation:

Previous concepts

The binomial distribution is a "DISCRETE probability distribution that summarizes the probability that a value will take one of two independent values under a given set of parameters. The assumptions for the binomial distribution are that there is only one outcome for each trial, each trial has the same probability of success, and each trial is mutually exclusive, or independent of each other".

Solution to the problem

Let X the random variable of interest, on this case we now that:

$X \sim Binom(n=19, p=0.3)$

The probability mass function for the Binomial distribution is given as:

$P(X)=(nCx)(p)^x (1-p)^{n-x}$

Where (nCx) means combinatory and it's given by this formula:

$nCx=\frac{n!}{(n-x)! x!}$

And we want to find this probability:

$P(X \geq 5)$

And we can use the complement rule:

$P(X \geq 5)=1-P(X$

We can find the individual probabilities:

$P(X=0)=(19C0)(0.3)^0 (1-0.3)^{19-0}=0.00114$

$P(X=1)=(19C1)(0.3)^1 (1-0.3)^{19-1}=0.0092$

$P(X=2)=(19C2)(0.3)^2 (1-0.3)^{19-2}=0.0358$

$P(X=3)=(19C3)(0.3)^3 (1-0.3)^{19-3}=0.0869$

$P(X=4)=(19C4)(0.3)^4 (1-0.3)^{19-4}=0.1491$

And replacing we got:

$P(X \geq 5) = 1-[0.00114+0.009282+0.0358+0.0869+0.149]= 0.7178$

4 0

3 years ago