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Harman [31]
2 years ago
13

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

er Plan I, the company would have 320,000 shares of stock outstanding. Under Plan II, there would be 240,000 shares of stock outstanding and $2,272,000 in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.
Assume that EBIT is $700,000. Compute the EPS for both Plan I and Plan II.
Business
1 answer:
AlladinOne [14]2 years ago
6 0

Answer:

Plan I EPS = $2.19

Plan II EPS = $1.97

Explanation:

The computation of EPS for both Plan I and Plan II is shown below:-

                               Plan I                Plan II

Expected EBIT      $700,000       $700,000

Less Interest                                 $227,200

                                            ($2,272,000 × 10%)

Profit before tax a   $700,000      $472,800

Less: Tax

Earning to equity

shareholder b           $700,000      $472,800

Number of equity

Shares (a ÷ b)              $2.19             $1.97

Therefore for Plan I the EPS = $2.19 and for Plan II the EPS = $1.97

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svlad2 [7]

Answer:

the operating margin is 5.4%

Explanation:

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As we know that

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4 0
3 years ago
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<h3 /><h3>The properties having HIGHEST specific limitation on coverage.</h3>

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Some of these specific limits apply to a building or personal property at a single location.

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8 0
2 years ago
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Answer:

$22

Explanation:

Given that,

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