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Author Question: Consider two firms that are identical in every way except that one has $1,200 of debt and 350 shares ... (Read 92 times)

Jramos095

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on: Apr 25, 2021
Consider two firms that are identical in every way except that one has $1,200 of debt and 350 shares of stock outstanding, while the other is all-equity and has 400 shares of stock outstanding. Assume that the debt is a perpetuity with annual coupons at the rate of 7%. What is each firm's earnings per share if EBIT is $5,000? Assume a tax rate of 40%.

​Leveraged FirmAll-Equity Firm
EBIT$5,000$5,000
EPS??

◦ EPSL = 8.39; EPSE = 7.50
◦ EPSL = 8.39; EPSE = 8.39
◦ EPSL = 7.50; EPSE = 7.50
◦ EPSL = 7.50; EPSE = 8.39
◦ EPSL = 8.43; EPSE = 7.50
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Marked as best answer by Jramos095 on Apr 25, 2021

bbburns21

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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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Jramos095

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Reply 2 on: Apr 25, 2021
Excellent

jomama

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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