26 Jul DISCUSS THE LEVERAGE AND RISK ASPECTS OF EACH STRUCTURE.
The key info Show more P1322 EBITEPS and capital structure Data-Check is considering two capital structures. The key information is shown in the following table. Assume a 40% tax rate. Source of capital Structure A Structure B Long-term debt $100000 at 16% coupon rate $200000 at 17% coupon rate Common stock 4000 shares 2000 shares a. Calculate two EBITEPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values. b. Plot the two capital structures on a set of EBITEPS axes. c. Indicate over what EBIT range if any each structure is preferred. d. Discuss the leverage and risk aspects of each structure. e. If the firm is fairly certain that its EBIT will exceed $75000 which structure would you recommend? Why? Show less
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