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A firm has a current capital structure consisting of R400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary Income. If the EBIT is expected to be R200,000, two EBIT-EPS coordinates for the firm's existing capital structure are

A firm has a current capital structure consisting of R400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary Income. If the EBIT is expected to be R200,000, two EBIT-EPS coordinates for the firm's existing capital structure are

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A firm has a current capital structure consisting of R400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary income. If the EBIT is expected to be R200,000, two EBIT-EPS coordinates for the firm's existing capital structure are A. (R36 000, RO) and (R200 000, R3.04). B. (R48 000, RO) and (R200 000, R1.82). C. (RO, R48 000) and (R200 000, R1.82). D. (R152 000, R3.50) and (R150 000, R1.82).
Transcribed Image Text:A firm has a current capital structure consisting of R400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary income. If the EBIT is expected to be R200,000, two EBIT-EPS coordinates for the firm's existing capital structure are A. (R36 000, RO) and (R200 000, R3.04). B. (R48 000, RO) and (R200 000, R1.82). C. (RO, R48 000) and (R200 000, R1.82). D. (R152 000, R3.50) and (R150 000, R1.82).
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