Medallion Cooling Systems, Inc., has total assets of $10,000,000, EBIT of $2,000,000, and preferred dividends of $200,000 and is
taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment:,
a. Calculate earnings per share for each level of indebtedness.,
b. Use Equation 13.12 and the earnings per share calculated in part a to calculate a price per share for each level of indebtedness.,
c. Choose the optimal capital structure. Justify your choice
a. Calculate earnings per share for each level of indebtedness.,
b. Use Equation 13.12 and the earnings per share calculated in part a to calculate a price per share for each level of indebtedness.,
c. Choose the optimal capital structure. Justify your choice
1 answer:
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<em><u>The equation shows the relationship between her weekly salary (w), hours per week (h), and rate per hour (r) is:</u></em>
<em><u>Solution:</u></em>
Given that,
Alice earned $12 per hour
1 hour = $ 12
<em><u>Find the number of hours in 1 week</u></em>
1 day = 24 hours
1 week = 7 days
Therefore,
1 week = 7 x 24 = 168 hours
Let "h" be the hours per week
let "r" be the rate per hour
Let "w" be the rate per hour
From given,
r = $ 12
h = 168 hours
weekly salary = hours per week x rate per hour
Thus, she earns $ 2016 for 1 week