This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Cyborg Mechatronics is entirely equity financed with 400 shares outstanding and a market ... (Read 42 times)

mckennatimberlake

  • Hero Member
  • *****
  • Posts: 559
on: Apr 25, 2021
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
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
Buy Test-Bank


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
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.
Answer Preview
Only 35% of students answer this correctly


mckennatimberlake

  • Member
  • Posts: 559
Reply 2 on: Apr 25, 2021
Thanks for the timely response, appreciate it

Dnite

  • Member
  • Posts: 297
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Your heart beats over 36 million times a year.

Did you know?

The average office desk has 400 times more bacteria on it than a toilet.

Did you know?

A headache when you wake up in the morning is indicative of sinusitis. Other symptoms of sinusitis can include fever, weakness, tiredness, a cough that may be more severe at night, and a runny nose or nasal congestion.

Did you know?

Certain topical medications such as clotrimazole and betamethasone are not approved for use in children younger than 12 years of age. They must be used very cautiously, as directed by a doctor, to treat any child. Children have a much greater response to topical steroid medications.

Did you know?

Nearly all drugs pass into human breast milk. How often a drug is taken influences the amount of drug that will pass into the milk. Medications taken 30 to 60 minutes before breastfeeding are likely to be at peak blood levels when the baby is nursing.

Many types of edible fungi are grown for the market. Many types of edible fungi are grown for the market.
Norway lobsters on sale at a Spanish market Norway lobsters on sale at a Spanish market
Australopithecus sediba shares small brain size with other members of Australopithecus but also has Australopithecus sediba shares small brain size with other members of Australopithecus but also has
Walter Thompson saw his assets evaporate during the stock market collapse in 1929. Desperate for ... Walter Thompson saw his assets evaporate during the stock market collapse in 1929. Desperate for ...
Efficiency vs. Equity Efficiency vs. Equity
A car wash reduced the price of a basic wash as a promotion and test of the market. With the ... A car wash reduced the price of a basic wash as a promotion and test of the market. With the ...
Video: Sigmoidoscopy

For a complete list of videos, visit our video library