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b. Compute earnings per share under the Silverman plan. (Round your answer to 2 decimal places.)

b. Compute earnings per share under the Silverman plan. (Round your answer to 2 decimal places.)

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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b. Compute earnings per share under the Silverman plan. (Round your answer to 2 decimal places.) Earnings per share
Transcribed Image Text:b. Compute earnings per share under the Silverman plan. (Round your answer to 2 decimal places.) Earnings per share
Check my work 6. Mr. Gold is in the widget business. He currently sells 1.5 million widgets a year at $6 each. His variable cost to produce the widgets is $4 per unit, and he has $1,550,000 in fixed costs. His sales-to-assets ratio is six times, and 30 percent of his assets are financed with 10 percent debt, with the balance financed by common stock at $10 par value per share. The tax rate is 35 percent. 1.42 His brother-in-law, Mr. Silverman, says Mr. Gold is doing it all wrong. By reducing his price to $5.00 a widget, he could increase his volume of units sold by 60 percent. Fixed costs would remain constant, and variable costs would remain $4 per unit. His sales-to- assets ratio would be 7.5 times. Furthermore, he could increase his debt-to-assets ratio to 50 percent, with the balance in common stock. It is assumed that the interest rate would go up by 1 percent and the price of stock would remain constant. points eBook
Transcribed Image Text:Check my work 6. Mr. Gold is in the widget business. He currently sells 1.5 million widgets a year at $6 each. His variable cost to produce the widgets is $4 per unit, and he has $1,550,000 in fixed costs. His sales-to-assets ratio is six times, and 30 percent of his assets are financed with 10 percent debt, with the balance financed by common stock at $10 par value per share. The tax rate is 35 percent. 1.42 His brother-in-law, Mr. Silverman, says Mr. Gold is doing it all wrong. By reducing his price to $5.00 a widget, he could increase his volume of units sold by 60 percent. Fixed costs would remain constant, and variable costs would remain $4 per unit. His sales-to- assets ratio would be 7.5 times. Furthermore, he could increase his debt-to-assets ratio to 50 percent, with the balance in common stock. It is assumed that the interest rate would go up by 1 percent and the price of stock would remain constant. points eBook
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