Bonakid Inc. has decided to invest P10,000,000 in a new headquarters and needs to determine the best way to finance the construction. The firm currently has P50,000,000 of 10% bonds and 4,000,000 common shares outstanding. The firm can obtain the P10,000,000 of financing through a 10% bond issue or the sale of 1,000,00O shares of common stock. The firm has a 40 percent tax rate. What is the degree of financial leverage for Bond Issue plan at P25,000,000 of EBIT? (answer
Bonakid Inc. has decided to invest P10,000,000 in a new headquarters and needs to determine the best way to finance the construction. The firm currently has P50,000,000 of 10% bonds and 4,000,000 common shares outstanding. The firm can obtain the P10,000,000 of financing through a 10% bond issue or the sale of 1,000,00O shares of common stock. The firm has a 40 percent tax rate. What is the degree of financial leverage for Bond Issue plan at P25,000,000 of EBIT? (answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Bonakid Inc. has decided to invest
P10,000,000 in a new
headquarters and needs to
determine the best way to finance
the construction. The firm
currently has P50,000,000 of 10%
bonds and 4,000,000 common
shares outstanding. The firm can
obtain the P10,000,000 of
financing through a 10% bond
issue or the sale of 1,000,000
shares of common stock. The firm
has a 40 percent tax rate. What is
the degree of financial leverage
for Bond Issue plan at
P25,000,000 of EBIT? (answer
format: 5.48) *
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