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marissa [1.9K]
3 years ago
11

oneycutt Co. is comparing two different capital structures. Plan I would result in 39,000 shares of stock and $108,000 in debt.

Plan II would result in 33,000 shares of stock and $324,000 in debt. The interest rate on the debt is 7 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $160,000. The all-equity plan would result in 42,000 shares of stock outstanding. What is the EPS for each of these plans
Business
1 answer:
Mila [183]3 years ago
8 0

Answer:

All equity plan:

EPS = $160,000 / 42,000 = $3.81

Plan I:

EPS = [$160,000 - ($108,000 x 7%)] / 39,000 = $152,440 / 39,000 = $3.91

Plan II:

EPS = [$160,000 - ($324,000 x 7%)] / 33,000 = $137,320 / 33,000 = $4.16

Plan II is better since the resulting EPS is higher than the other alternatives.

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A managerial accounting team is working with a production manager to determine the cause of unexpected production delays. Based
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3 years ago
Burns Industries currently manufactures and sells 18,000 power saws per month, although it has the capacity to produce 33,000 un
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Answer:

Burns Industries

Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least:

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