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Date Wireless has the following assets: Current assets: Temporary Permanent Capital assets Total assets $1,000,000 1,000,000 7,000,000 $9,000,000 Its operating profit (EBIT) is expected to be $1.0 million. Its tax rate is 40 percent. Shares are valued at $25. Capital structure is either short-term financing at 6 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.

Date Wireless has the following assets: Current assets: Temporary Permanent Capital assets Total assets $1,000,000 1,000,000 7,000,000 $9,000,000 Its operating profit (EBIT) is expected to be $1.0 million. Its tax rate is 40 percent. Shares are valued at $25. Capital structure is either short-term financing at 6 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Date Wireless has the following assets: Current assets: Temporary Permanent Capital assets Total assets Its operating profit (EBIT) is expected to be $1.0 million. Its tax rate is 40 percent. Shares are valued at $25. Capital structure is either short-term financing at 6 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. EPS b. Calculate expected EPS if it has a capital structure of 40% debt. EPS c. Recalculate a and bif short-term rates go to 11 percent. Hedged Capital structure $ 27 27 $1,000,000 1,000,000 7,000,000 $9,000,000 EPS
Transcribed Image Text:Date Wireless has the following assets: Current assets: Temporary Permanent Capital assets Total assets Its operating profit (EBIT) is expected to be $1.0 million. Its tax rate is 40 percent. Shares are valued at $25. Capital structure is either short-term financing at 6 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. EPS b. Calculate expected EPS if it has a capital structure of 40% debt. EPS c. Recalculate a and bif short-term rates go to 11 percent. Hedged Capital structure $ 27 27 $1,000,000 1,000,000 7,000,000 $9,000,000 EPS
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