Love, Inc. has a debt ratio of 25%. Management is wondering if tis current capital structure is too conservative. Love, Inc. Present EBIT is P3.0 million, and profits available to common shareholders are P1,680,000 with 457,143 shares common stock outstanding. If the firm were to instead have a debt ratio of 45%, additional interest expense would cause profits available to stockholders to decline to P1,560,000 but only 342, 857 common shares would be outstanding. What is the difference in Earnings per share at a debt ratio of 45% versus 25%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Love, Inc. has a debt ratio of 25%. Management is wondering if tis current capital structure is too conservative. Love, Inc. Present EBIT is P3.0 million, and profits available to common shareholders are P1,680,000 with 457,143 shares common stock outstanding. If the firm were to instead have a debt ratio of 45%, additional interest expense would cause profits available to stockholders to decline to P1,560,000 but only 342, 857 common shares would be outstanding. What is the difference in Earnings per share at a debt ratio of 45% versus 25%

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