Based on the information in Table 4-1, the OROA is A) 24.73. ...

[mwit1967]

Based on the information in Table 4-1, the OROA is
 
  A) 24.73. B) 46.54. C) 52.78. D) 39.50.

Question 2

Calculate an EBIT break-even between a debt firm (DF) and an all-equity firm (EF) based on the following information: DF interest = 60,000, DF number common shares = 5,000, EF number of common shares = 12,000, and tax rate = 40 percent.
 
  A) EBIT = 234,547 and EPS = 10.35
  B) EBIT = 146,312 and EPS = 7.02
  C) EBIT = 102,857 and EPS = 5.14
  D) EBIT = 91,217 and EPS = 4.18

[mochi09]

Answer to Question 1

C

Answer to Question 2

C
Explanation: C) (EBIT-0)(1-t)/n = (EBIT - I)(1-t)/n = (EBIT-0)(.60)/12,000 = (EBIT - 60,000)(.60)/5,000
EBIT = 102,857 and EPS = 5.14.

[mwit1967]

TY

[mochi09]

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