Date Wireless has the following assets: Current assets: Temporary $1,190,000 Permanent 1,380,000 Capital assets 7,950,000 Total assets $10,520,000 Its operating profit (EBIT) is expected to be $2.9 million. Its tax rate is 30 percent. Shares are valued at $20. Capital structure is either short- term financing at 5 percent or equity. There is no long-term debt. (Round the final answers to 2 decimal places.) a. Calculate expected earnings per share (EPS) if the firm is perfectly hedged. Choose. b. Calculate expected EPS if it has a capital structure of 30% $4.14 debt. c. Calculate expected earnings per share (EPS) if the firm is perfectly hedged and short term Choose. rates increase to 12%.

Date Wireless has the following assets: Current assets: Temporary $1,190,000 Permanent 1,380,000 Capital assets 7,950,000 Total assets $10,520,000 Its operating profit (EBIT) is expected to be $2.9 million. Its tax rate is 30 percent. Shares are valued at $20. Capital structure is either short- term financing at 5 percent or equity. There is no long-term debt. (Round the final answers to 2 decimal places.) a. Calculate expected earnings per share (EPS) if the firm is perfectly hedged. Choose. b. Calculate expected EPS if it has a capital structure of 30% $4.14 debt. c. Calculate expected earnings per share (EPS) if the firm is perfectly hedged and short term Choose. rates increase to 12%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 8P

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Jordan Manufacturing reports the following capital structure: Current liabilities P100,000 ; Long-term debt 400,000 ; Deferred income taxes 10,000 ; Preferred stock 80,000 ; Common stock 100,000 ; Premium on common stock 180,000 ; Retained earnings 170,000. What is the debt ratio? A. 0.48 B. 0.49 C. 0.93 D. 0.96
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