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$7,200,000 at 10% a) What would be wcC's EPS (1) under the old production process, (2) under the new process if it uses debt, and (3) under the new process if it uses common stock? Rand your answers to the nearest cent. 2. $ 3. $ - 5)At what unit sales level would we have the same EPS it under takes the investment and finances it with debt ar with stock? Rand your answer to the nearest whote cumber or units At what unit sales level would EPS= 0 under the three Production / financing setups - that is, under the old plan, the new plan with debt financing, and the new plan with stock finonang? Round your answer to the nearest whole number. units/New plan with debt financing- id plan:- units 23

$7,200,000 at 10% a) What would be wcC's EPS (1) under the old production process, (2) under the new process if it uses debt, and (3) under the new process if it uses common stock? Rand your answers to the nearest cent. 2. $ 3. $ - 5)At what unit sales level would we have the same EPS it under takes the investment and finances it with debt ar with stock? Rand your answer to the nearest whote cumber or units At what unit sales level would EPS= 0 under the three Production / financing setups - that is, under the old plan, the new plan with debt financing, and the new plan with stock finonang? Round your answer to the nearest whole number. units/New plan with debt financing- id plan:- units 23

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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4 L prt sc = delete backspace alt home [ ctrl 1 www 18 pause 2 Chapter 14 Homework #7 Wingter communications Corporation (WCC) produces. airpods that and this year's Sales are expected to be 440, por set, 440,000 units. Vanable Production costs at present are $1,560,000 WCC has $4, 800,000 of debt outstanding at on 14 the stack 7% There are 240,000 shares of common outstanding, and there is no preferred stock. The dividend payout ratio is 70% and wee is in the 25% federal-plus- state tax brucket. WCC is a small company with average Sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. ** The company is considering inves has $7,200,000 in new equipment. Sales would not increase, but variable costs per wit would decline 35 20%. Also, fixed operating costs would increase from $1,560,000 to $1,800,000. WCC could raise the required capital by bomowing $7,200,000 at 10% a) What would be wcC's EPS (1) under the old production process, (2) under the new process if it uses debt, and (3) under the new process if it uses common stock? Rand your answers to the nearest cent. 2.$ 3. $ 5) At what unit sales level would wcc have the same EPS it undertakes the investment and finances it with debt assuming or with stock? Round your answer to the nearest whate number units () At what unit sales level would EPS = 0 under the three Production / froncing setups - that is, under the old plan, the new plan with debt financing, and the new plan with stock financing? Round your answer to the nearest whole sember id plan: units / New plan with debt financing. EPS Debt: $ EPS stock: $ PE units 23 New plan with stuck financing. units d) on the basis of the analysis in parts a through c, and given that operating leverage is lower under the new setup, which plan is the riskiest, which has the highest expected EPS, and which would you recommend? Assume that there is a fairls high probability of sales falling as low as 250,000 units. Determine EPS pebt. and EPSstock at that sales level to help assess the riskiness of the two financing plans. Negative values should be inclicated by a minus sign. Rand your answers to the newest cent.
Transcribed Image Text:4 L prt sc = delete backspace alt home [ ctrl 1 www 18 pause 2 Chapter 14 Homework #7 Wingter communications Corporation (WCC) produces. airpods that and this year's Sales are expected to be 440, por set, 440,000 units. Vanable Production costs at present are $1,560,000 WCC has $4, 800,000 of debt outstanding at on 14 the stack 7% There are 240,000 shares of common outstanding, and there is no preferred stock. The dividend payout ratio is 70% and wee is in the 25% federal-plus- state tax brucket. WCC is a small company with average Sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. ** The company is considering inves has $7,200,000 in new equipment. Sales would not increase, but variable costs per wit would decline 35 20%. Also, fixed operating costs would increase from $1,560,000 to $1,800,000. WCC could raise the required capital by bomowing $7,200,000 at 10% a) What would be wcC's EPS (1) under the old production process, (2) under the new process if it uses debt, and (3) under the new process if it uses common stock? Rand your answers to the nearest cent. 2.$ 3. $ 5) At what unit sales level would wcc have the same EPS it undertakes the investment and finances it with debt assuming or with stock? Round your answer to the nearest whate number units () At what unit sales level would EPS = 0 under the three Production / froncing setups - that is, under the old plan, the new plan with debt financing, and the new plan with stock financing? Round your answer to the nearest whole sember id plan: units / New plan with debt financing. EPS Debt: $ EPS stock: $ PE units 23 New plan with stuck financing. units d) on the basis of the analysis in parts a through c, and given that operating leverage is lower under the new setup, which plan is the riskiest, which has the highest expected EPS, and which would you recommend? Assume that there is a fairls high probability of sales falling as low as 250,000 units. Determine EPS pebt. and EPSstock at that sales level to help assess the riskiness of the two financing plans. Negative values should be inclicated by a minus sign. Rand your answers to the newest cent.
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