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Author Question: Consider two firms that are identical in every way except that one has $15,000 of debt and 500 ... (Read 87 times)

jwb375

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on: Apr 25, 2021
Consider two firms that are identical in every way except that one has $15,000 of debt and 500 shares of stock outstanding, while the other is all-equity and has 650 shares of stock outstanding. Assume that the debt is a perpetuity with annual coupons at the rate of 6%. What is each firms' earnings per share if EBIT is $7,500? Assume a tax rate of 40%. 

​Leveraged FirmAll-Equity Firm
EBIT$7,500$7,500
EPS??

◦ EPSL = 7.92; EPSE = 7.92
◦ EPSL = 6.92; EPSE = 7.92
◦ EPSL = 6.92; EPSE = 6.92
◦ EPSL = 7.92; EPSE = 6.92
◦ EPSL = 8.92; EPSE = 6.92
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Marked as best answer by jwb375 on Apr 25, 2021

ngr69

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Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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jwb375

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Reply 2 on: Apr 25, 2021
Thanks for the timely response, appreciate it

Joy Chen

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Reply 3 on: Yesterday
Excellent

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