Last year, Cayman Corporation had sales of $7,000,000, total variable costs of $3,000,000, and total fixed costs of $1,500,000. In addition, they paid $480,000 in interest to bondholders. Cayman has a 35% marginal tax rate. If Cayman's sales increase 7%, what should be the increase in earnings per share? a. 13.3% b. 11.2% C. 13.9% d. 10.8% e. 8.7%

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter2: Financial Statements, Cash Flow,and Taxes
Section: Chapter Questions
Problem 7P
icon
Related questions
Question

General Accounting question give answer

Last year, Cayman Corporation had sales of $7,000,000, total
variable costs of $3,000,000, and total fixed costs of $1,500,000.
In addition, they paid $480,000 in interest to bondholders.
Cayman has a 35% marginal tax rate. If Cayman's sales increase
7%, what should be the increase in earnings per share?
a. 13.3%
b. 11.2%
C. 13.9%
d. 10.8%
e. 8.7%
Transcribed Image Text:Last year, Cayman Corporation had sales of $7,000,000, total variable costs of $3,000,000, and total fixed costs of $1,500,000. In addition, they paid $480,000 in interest to bondholders. Cayman has a 35% marginal tax rate. If Cayman's sales increase 7%, what should be the increase in earnings per share? a. 13.3% b. 11.2% C. 13.9% d. 10.8% e. 8.7%
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning