> Frankline Coin, Inc. is considering two capital structures. The key information follows. Assume a 40 percent tax rate and expected EBIT of $50,000. Source of Capital Long-Term debt Common Stock Structure 1 $500,000 @ 8% 10,000 shares Structure 2 $350,000 @ 7% 20,000 shares (a) Calculate two EBIT-EPS coordinates for each of the structures. (b) Indicate over what FRIT range if any each str ture is preferred

> Frankline Coin, Inc. is considering two capital structures. The key information follows. Assume a 40 percent tax rate and expected EBIT of $50,000. Source of Capital Long-Term debt Common Stock Structure 1 $500,000 @ 8% 10,000 shares Structure 2 $350,000 @ 7% 20,000 shares (a) Calculate two EBIT-EPS coordinates for each of the structures. (b) Indicate over what FRIT range if any each str ture is preferred

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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I need help with the last two subsets (d and e). I have created a chart for the EBIT-EPS coordinates.
EBIT-EPS and capital structure Data-Check is considering two capital structures. The key information is shown in the following table. Assume a 40% tax rate. Source of capital Long-term debt Common stock Structure A $92,000 at 15.2% coupon rate 4,400 shares Structure B $184,000 at 16.2% coupon rate 2,200 shares 5 a. Calculate two EBIT-EPS coordinates for each of the structures by selecting any two EBIT values and finding their associated EPS values. b. Plot the two capital structures on a set of EBIT-EPS axes. c. Indicate over what EBIT range, if any, each structure is preferred. d. Discuss the leverage and risk aspects of each structure. e. If the firm is fairly certain that its EBIT will exceed $73,000, which structure would you recommend? Why? 00 S
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Subject: accounting
Question attached below.
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Give typing answer with explanation and conclusion
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