23 Jul WHAT IS THE EBIT/TA RATE WHEN THE FIRM’S HAVE EQUAL EPS?
s Phar Show more Problem 5-16 Earnings per share and financial leverage [LO4] Lenows Drug Stores and Halls Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented next. Lenow Lenow Lenow Hall Hall Hall Debt @ 9% $ 250000 Debt @ 9% $ 500000 Common stock $10 par 500000 Common stock $10 par 250000 Total $ 750000 Total $ 750000 Common shares 50000 Common shares 25000 a. Complete the following table given earnings before interest and taxes of $29000 $67500 and $73000. Assume the tax rate is 20 percent. (Leave no cells blank be certain to enter 0 wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) EBIT Total assets EBIT/TA Lenow EPS Hall EPS What is the relationship between the EPS of the two firms? $ 29000 $750000 % $ $ (Click to select)Lenows EPS > Halls EPSLenows EPS = Halls EPSLenows EPS < Hall’s EPS $ 67500 $750000 % $ $ (Click to select)Lenow’s EPS > Halls EPSLenows EPS = Halls EPSLenows EPS < Hall’s EPS $73000 $750000 % $ $ (Click to select)Lenow’s EPS > Halls EPSLenows EPS = Halls EPSLenows EPS < Hall’s EPS b-1. What is the EBIT/TA rate when the firm’s have equal EPS? EBIT/TA rate % b-2. What is the cost of debt? Cost of debt % b-3. State the relationship between earnings per share and the level of EBIT. EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA) (Click to select)equalsexceedsis less than the cost of debt. c. If the cost of debt went up to 11 percent and all other factors remained equal what would be the break-even level for EBIT? Break-even level $ Show less
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.