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Solnce55 [7]
2 years ago
6

Paradise Travels is an all-equity firm that has 9,000 shares of stock outstanding at a market price of $27 a share. Management h

as decided to issue $25,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 7.3 percent. What are the earnings per share at the break-even level of earnings before interest and taxes
Business
1 answer:
Vesna [10]2 years ago
7 0

Answer:

$1.97

Explanation:

EBIT/9,000 = [EBIT - $25,000*(0.073)] / [9,000 - ($25,000 / $27)]

EBIT / 9,000 = [EBIT - $1,825] / 8074.07

EBIT = $17,739

EPS = [EBIT - $25,000*(0.073)] / [9,000 - ($25,000 / $27)]

EPS = [$17,739 - $25,000*(0.073)] / [9,000 - ($25,000 / $27)]

EPS = $1.97

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Aaron Company has 80,000 shares of $10 par common stock outstanding. On May 25, Aaron Company declared a $1.50 cash dividend. Th
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Answer:

a.a debit to Cash Dividends for $120,000.

Explanation:

The amount of dividend paid is dependent on two function; the number of shares and the amount declared for payment per share.

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