The following information pertains to the Classic Burger Restaurant chain: Sales $600,000 Variable costs 300,000 Fixed costs 100,000 EBIT 200,000 Interest expense 50,000 Earnings before taxes 150,000 Taxes (30%) 45,000 Net income $105,000 a. If sales increase by 10%, what will be the new level of EPS if the firm has 100,000 shares outstanding? b. What is the percentage increase in EPS? Explain the difference between the percentage increase in sales and the percentage increase in EPS. (*You must show your calculation process as well.)

The following information pertains to the Classic Burger Restaurant chain: Sales $600,000 Variable costs 300,000 Fixed costs 100,000 EBIT 200,000 Interest expense 50,000 Earnings before taxes 150,000 Taxes (30%) 45,000 Net income $105,000 a. If sales increase by 10%, what will be the new level of EPS if the firm has 100,000 shares outstanding? b. What is the percentage increase in EPS? Explain the difference between the percentage increase in sales and the percentage increase in EPS. (*You must show your calculation process as well.)

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

Problem 1PS

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calculate the degree of financial leverage for a firm with EBIT of $6,000,000, fixed cost of $3,000,000 interest expense of $1000000 preferred stock dividends of 800000 and a 40% tax rate
A firm's current market value of equity is $100 million. It has one million shares outstanding. The firm's equity multiplier is one, and it had sales of $50 million last year. Its profit margin was 5%. What is the firm's implied price-earnings ratio? O 40 O5 O 16 O 20 0 8
An investor gathers the following data about the LOR,Inc: ROE 15% Retention Ratio 70% Required Return on Shares 12% Next Year's EPS $5 Answer the questions and provide calculations: A. What is the sustainable growth rate of the company? B. justified trailing P/E is closest to: C. justified forward P/E is closest to: D. If the industry justified leading P/E ratio is 18 is the stock of the company fairly valued, under/overvalued? E. What is the companies PEG ratio based on justified forward P/E?
Assume the following information pertains to Zigler Corporation: Sales $1,000,000 Total Variable Costs (40% of sales) 400,000 Fixed Costs EBIT Interest Expense EBT Taxes (21%) EAT #shares outstanding EPS 300,000 300,000 100,000 200,000 42,000 158,000 100,000 $1.58 Determine EPS if sales increase to $1,200,000. Then determine the DOL, the DFL, and the DCL.
You are considering a new supplier that you estimate would reduce your costs 0.025, increasing overall EBIT margin the same amount, or 250 basis points. Tax burden 0.79 Interest burden 0.8 Operating margin Asset turnover 2.1 Leverage ratio 1.2 Equity 56 Before the changes are made the firm was intrinsically valued at 45.54 After the changes, what would the new value be assuming the new ROE, growth, and EPS1. The firm pays dividends as 0.61 of EPS. The discount rate is 0.15" O 64.88 O 70.24 62.35 O 67.36 0.08 O 73.13
The financial manager for "ERR" industrial Company would extend the credit terms from "net 30" to "net 45" in order to stimulate credit sales. 'ERR' Company also benefits from relaxing of terms from its suppliers from "net 30" to "net 35". The manager is wondering how to estimate the financial impact of these alternatives would have on the shareholder's wealth. The financial manager estimates that the daily sales increase at a growth rate equals 10% following the extension of DSO. You gathered the following information:Purchase amount = 40% of sales amount Annual sales amount = $31,025,000 The annual cost of capital = 10% Inventory turnover =18.25 1- Calculate the daily NPV of the current terms. 2- Calculate the daily NPV of the proposed terms. 3- Based on your own calculations, what is your recommendation? Why? 4- Calculate the NPVCCP of the present terms. Interpret. 5- Calculate the ANPVCCP-aggregate of the Company. Interpret.
You are given the following information concerning a firm: Assets required for operation: $5,000,000 Revenues: $8,400,000 Operating expenses: $7,900,000 Income tax rate: 40%. Management faces three possible combinations of financing: 100% equity financing 30% debt financing with a 6% interest rate 60% debt financing with a 6% interest rate What is the implication of the use of financial leverage when interest rates change?
A firm retains earnings of $40,000. What is the total external financing needed if this company, with $120,00 O in assets, has projected a growth rate of 8 percent? Multiple Choice Zero $3,200 $30,400 $9,600 $100,00 0
9
Cut off at the bottom is "Expansion percentage change in EPS". Thank you.

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