This topic contains a solution. Click here to go to the answer

Author Question: Cyborg Mechatronics is entirely equity financed with 400 shares outstanding and a market ... (Read 97 times)

mckennatimberlake

  • Hero Member
  • *****
  • Posts: 559
Cyborg Mechatronics is entirely equity financed with 400 shares outstanding and a market capitalization of $18,750 (P=$46.875). Current financial data for Cyborg is provided in the table below for two states of nature, which correspond with two levels of sales. The standard deviation of EPS is $1.875. The CFO of Cyborg, John Conner, is considering a change in capital structure. In particular, he is thinking about borrowing $6,562.50. He will borrow the money by issuing perpetual bonds with a face value of $6,562.50 and a coupon rate of 6%. The borrowed money will be used to repurchase shares at $46.875 per share. Repurchased shares will be cancelled. Taxes are 0%. First, calculate the EPS in each state of nature if Cyborg borrows the money. Second, calculate the standard deviation of the EPS. What is the ratio of the standard deviation of EPS with the leveraged capital structure to the standard deviation under the current, all equity capital structure?

Cyborg Mechatronics
BadGood
EBIT $750$2,250
Interest00
Pre-Tax Income7502,250
Taxes (0%)00
Net Income7502,250
# Shares400400
EPS$1.88 $5.63 

◦ 0.54
◦ 1.25
◦ 1.54
◦ 1.88
◦ 2.89


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by mckennatimberlake on Apr 25, 2021

Hdosisshsbshs

  • Sr. Member
  • ****
  • Posts: 315
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.
Answer Preview
Only 35% of students answer this correctly




mckennatimberlake

  • Member
  • Posts: 559
Reply 2 on: Apr 25, 2021
Excellent


AISCAMPING

  • Member
  • Posts: 347
Reply 3 on: Yesterday
Wow, this really help

 

Did you know?

More than nineteen million Americans carry the factor V gene that causes blood clots, pulmonary embolism, and heart disease.

Did you know?

Dogs have been used in studies to detect various cancers in human subjects. They have been trained to sniff breath samples from humans that were collected by having them breathe into special tubes. These people included 55 lung cancer patients, 31 breast cancer patients, and 83 cancer-free patients. The dogs detected 54 of the 55 lung cancer patients as having cancer, detected 28 of the 31 breast cancer patients, and gave only three false-positive results (detecting cancer in people who didn't have it).

Did you know?

Nearly 31 million adults in America have a total cholesterol level that is more than 240 mg per dL.

Did you know?

Cyanide works by making the human body unable to use oxygen.

Did you know?

The liver is the only organ that has the ability to regenerate itself after certain types of damage. As much as 25% of the liver can be removed, and it will still regenerate back to its original shape and size. However, the liver cannot regenerate after severe damage caused by alcohol.

For a complete list of videos, visit our video library