A firm currently has 800 shares outstanding and no debt. If the firm issues $1,600 of debt to buy back 100 shares, what is the break-even point for EBIT that would keep equity holder’s EPS the same under both capital structures? The cost of debt is 8% and the corporate tax rate is 30%.
Answers
The break-even point for EBIT is $16,400. Any EBIT above this amount would result in higher EPS under the original capital structure, and any EBIT below this amount would result in higher EPS under the new capital structure.
To find the break-even point for EBIT, we need to compare the EPS under the two capital structures. Let's start with the original capital structure:
800 shares outstanding
No debt
Under this capital structure, the earnings available to equity holders is simply the earnings before interest and taxes (EBIT), since there is no interest expense:
Earnings available to equity holders = EBIT
The EPS is calculated by dividing the earnings available to equity holders by the number of shares outstanding:
EPS = Earnings available to equity holders / Number of shares outstanding
= EBIT / 800
Now let's consider the new capital structure:
700 shares outstanding (after buying back 100 shares)
$1,600 of debt
Cost of debt = 8%
Corporate tax rate = 30%
Under this capital structure, the earnings available to equity holders is reduced by the interest expense on the debt:
Earnings available to equity holders = EBIT - Interest expense
The interest expense is calculated as:
Interest expense = Debt * Cost of debt
= $1,600 * 8%
= $128
The earnings available to equity holders is therefore:
Earnings available to equity holders = EBIT - $128
The EPS is calculated as before:
EPS = Earnings available to equity holders / Number of shares outstanding
= (EBIT - $128) / 700
To find the break-even point for EBIT, we need to set the EPS under the two capital structures equal to each other and solve for EBIT:
EBIT / 800 = (EBIT - $128) / 700
Multiplying both sides by 560, we get:
7EBIT = 8EBIT - 102,400
Simplifying and solving for EBIT, we get:
EBIT = $16,400
Therefore, the break-even point for EBIT is $16,400. Any EBIT above this amount would result in higher EPS under the original capital structure, and any EBIT below this amount would result in higher EPS under the new capital structure.
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Related Questions
Which of these is a disadvantage to only using cash to make purchases?
Answers
Cash advances require a lot of paperwork and are generally difficult to get is a disadvantage to only using cash to make purchases.
cash is felony gentle—forex or coins—that may be used to change items, debt, or offerings. every so often it also includes the fee of belongings that may be effortlessly converted into cash immediately, as reported with the aid of an employer.
Cash is the quantity of real cash an enterprise has at its disposal. it's miles are labeled on the balance sheet as a modern asset, which means it's miles in all likelihood for use within the subsequent 365 days, and is commonly held in bank money owed. money or its equal (consisting of a check) paid for goods or services at the time of purchase or delivery. coins. it's a shop of price. coins is extra than only a charge instrument. It permits humans to preserve money for saving functions without default chance. it is useful for a small man or woman-to-character presents and bills.Learn more about cash here: https://brainly.com/question/24179665
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Disclaimer: The question is incomplete. Please read below to find the missing content.
Which of the following is not a disadvantage to cash advances on a credit card?
a.
Cash advances are similar to loans in that they need to be paid back with interest.
b.
Cash advances require a lot of paperwork and are generally difficult to get.
c.
Cash advances are often the last thing to be paid when paying off your credit card.
d.
Cash advances often come with an interest rate much higher than your credit card.
Imagine you are an economic adviser to the Commonwealth Government. The Prime Minister wants to increase spending on public transport in major cities, but does not want to raise taxes. Identify alternative sources of revenue for the government to fund its new initiatives.
Answers
Answer: A combination of 1) Increased public transportation fees, 2) raise the gasoline tax, 3) increase or institute highway tolls, or 4) reduce the road construction budget and use that money for public transportation.
Explanation:
Actions 2-4 would provide incentives to use public transportation.
examine us government financial policies and what impact those have on exchange rates.
Answers
US government financial policies, including monetary and fiscal policies, have a substantial impact on exchange rates through factors like interest rates, investment flows, and economic growth, shaping the value of the US dollar.
Determine what are the US government financial policies?The US government financial policies, such as monetary policy and fiscal policy, can affect exchange rates in several ways. Monetary policy, controlled by the Federal Reserve, influences interest rates and the money supply.
When the Federal Reserve increases interest rates, it attracts foreign investors seeking higher returns, leading to an appreciation of the US dollar and a decrease in exchange rates. Conversely, lowering interest rates can weaken the US dollar.
Fiscal policy, determined by the government's spending and taxation decisions, can also impact exchange rates. Expansionary fiscal policies, such as increased government spending or tax cuts, can stimulate the economy and potentially lead to currency depreciation.
On the other hand, contractionary fiscal policies, like reduced government spending or tax hikes, can strengthen the currency. These policy measures and their impact on interest rates, investment flows, and economic growth play a crucial role in determining exchange rates.
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Which is a better domain name, thebbqshop. Me or thegrillsshop. Com?
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For global reach to the customers, the domain name which is better is thegrillsshop. Com
It is possible that "thegrillsshop.com" may be a better domain name for global reach compared to "thebbqshop.me", as ".com" is a more widely recognized and accepted top-level domain (TLD) globally.
Additionally, the word "grills" in "thegrillsshop.com" may have broader appeal and be more recognizable across different cultures and languages compared to "BBQ" in "thebbqshop.me".
However, it is important to note that factors such as branding, marketing, and website content are also critical for global reach and success, and a domain name alone may not determine the success of a business.
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Describe at least four ways you can take money out of a checking account.
Answers
Answer:
yes
Explanation:
You, as the account owner, can also withdraw or remove funds from the account. You can withdraw by automatic electronic transfer, check, ATM card or debit card. There are many ways these days to withdraw money from your accounts.
Total output is increasing but marginal product of labor is decreasing. This is an example of...
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-1 Name the Act that makes provision for employees to improve their work performance.
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you have been instructed to destroy several old hard drives that contained confidential information, so you take them to a local company that specializes in this process. the it director wants confirmation that the drives were properly destroyed. what do you need to provide him with?
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you need to provide him with a certificate of destruction.
In 1982, the German thrash metal group Destruction was founded. They are frequently referred to as one of the "Big Four" bands of German thrash metal, together with Kreator, Sodom, and Tankard. Destruction was a part of the second wave of thrash metal in the mid- to late 1980s, alongside American bands like Testament, Sacred Reich, Death Angel, and Dark Angel, and contributed to the creation of black metal by containing various aspects that would later make up the genre. The band had to self-produce its albums for the most of the 1990s because it was not signed to a record label, and they did so until they entered into an agreement with Nuclear Blast in the early 2000s.
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Arianna went shopping for a new video game because of a sale. The price on the tag was $32, but Arianna paid $20. 80 before tax. Find the percent discount.
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In this case, Arianna received a discount of approximately 35% on the video game she purchased during the sale.
To find the percent discount, we need to determine the difference between the original price and the discounted price, and then calculate that difference as a percentage of the original price. The original price of the video game was $32, and Arianna paid $20.80 before tax.
Discount = Original Price - Discounted Price
Discount = $32 - $20.80 = $11.20
Now, to find the percent discount, we divide the discount by the original price and multiply by 100:
Percent Discount = (Discount / Original Price) * 100
Percent Discount = ($11.20 / $32) * 100 ≈ 35%
the percent discount Arianna received on the video game is approximately 35%.
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Rhonda asks Steve, "Do you want to buy me to repair your fishing net?" This is
a. a valid offer.
b. not a valid offer because the terms are not definite.
c. not a valid offer because Rhonda did not express an intent.
d. not a valid offer because Steve did not respond.
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in general, aversion therapy and contingency management for substance use disorders are more successful when:
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Regaining a normal weight is the first goal of treatment.Anorexia cannot be overcome without regaining a healthy weight and learning how to properly eat.Participants in this process might include:Your primary care physician, who can both monitor your calorie requirements and weight gain.
When people want to get rid of stress, what are the most common things they do?
When people want to get rid of stress, the most common activity they engage in is: entertainment, such as reading, listening to music, or watching television.The following is a description of intentionally faking illness in order to achieve some external gain:malingering.
Which circumstance is most likely to result in a muscle dysmorphia diagnosis?
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If the demand for a product decreases, what is likely to happen?
A.
The supply is likely to increase.
B.
The demand is likely to be inelastic.
C.
The price is likely to increase.
D.
The price is likely to decrease.
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Price controls on goods can be set by?
O consumers.
O economists.
O governments.
O producers.
Answers
Answer: Price controls on goods can be set by governments.
Let (inverse) demand be Pb = 87 - 6 Qb and (inverse) supply be Pv = 27 + 4 Qv. Consider the shift in demand illustrated (the intercept of Pb moves by 9 ). The graph illustrates the demand for water in Los Angeles starting in the year 2020 and projected to 2050, what is the most likely cause of the shift depicted during this time period ? (1) A decrease in L.A.'s population; (2) An increase in L.A.'s population; (3) No change in L.A.'s population; (4) New water supply infrastructure projects; (5) An increase in the use of drought tolerant plants.
Answers
A shift in demand occurs when there is a change in the demand for a product or service. The graph illustrates the demand for water in Los Angeles from 2020 to 2050. Let (inverse) demand be Pb = 87 - 6 Qb and (inverse) supply be Pv = 27 + 4 Qv.
Consider the shift in demand illustrated (the intercept of Pb moves by 9).In this case, the most likely cause of the shift depicted during this time period is an increase in L.A.'s population. The demand curve shifts to the right as the population grows, indicating that the quantity of water demanded rises. As a result, an increase in the population of L.A. would cause an increase in the quantity of water demanded. The demand curve would shift to the right in this scenario. A change in demand occurs when there is a shift in the demand curve, which can be caused by a variety of factors such as population growth, a shift in consumer tastes, and so on. An increase in demand results in a shift to the right, whereas a decrease in demand results in a shift to the left. Supply curves, on the other hand, may shift to the right or left as a result of changes in production costs, the introduction of new technology, or other factors. A change in supply will shift the supply curve either to the left or to the right. The equilibrium point is where supply and demand intersect.
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Devon is very good with people. she works for a pharmaceutical company and often visits doctors to see if they will sell her product to their patients. in which career pathway is devon most likely involved? marketing communications professional sales and marketing distribution and logistics e-marketing
Answers
Marketing Communications is the utilization of many marketing channels and techniques in tandem.
What are the four kinds of marketing communication?Advertising, public relations, sales promotions, and online media are the four methods of marketing communication.
Advertising, being the most potent commercial communication tool, provides a broad audience reach and a high frequency of information transmission.
Public relations is the second sort of marketing communication. In a more subtle way, public relations will aid in the creation of brand awareness among customers. This is what distinguishes public relations from advertising.
Discounts on sales promotions are the most popular sort of sales promotion. When you realize this, you may begin to consider how you may make the most of the circumstance.
Media on the Internet Many businesses use online media as a marketing communication tool. This might be accomplished by purchasing appealing advertisements and placing them in promising places such as online newspapers and magazines.
Thus Option A is the career pathway Devon is involved in.
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Answer:
Marketing Communication
Explanation:
Edge 2022
A patent owner cannot exclude others from _____ his or her invention.
improving upon
making
selling
licensing
Answers
I hope this helps! Please make me the Brainliest, I put a lot of though, dedication, and research behind my answers :)
Help ASAP!!!! What is the most-possible answer?
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Answer:
Community and junior colleges.
Explanation:
I don't know if im too correct but if i am, mark me brainliest?:)
Answer:
D - Collages
Explanation:
That is the only thing I know that gives degrees
how does tax increase cost of production?
Answers
Answer:
Tax incidence is the effect a particular tax has on the two parties of a transaction; the producer that makes the good and the consumer that buys it. The burden of the tax is not dependent on whether the state collects the revenue from the producer or consumer, but on the price elasticity of supply and the price elasticity of demand. To understand how elasticities influence tax incidence, it is important to consider the two extreme scenarios and how the tax burden is distributed between the two parties.
Answer:
As with the specific tax, the tax raises production costs, but the amount of tax varies with price level.
Explanation:
a. The future value of $420 eight years from now at 10 percent. (Round your FV factor to 3 decimal places and final answer to 2 decimal places.)
Answers
The following equation can be used to determine future value with compound interest: future value = present value x (1 + interest rate)n. Use this formula to determine future value using simple interest: Future value equals current value multiplied by [1 + (interest rate over time)].
According to the formula for future value, FV = PV*(1+i)n, future value is equal to the present value multiplied by the sum of the annual percentage rate of interest multiplied by the number of time periods
Finance professionals use the Future Value (FV) calculation to determine the value of a cash flow at a time after it was initially received.
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How many people work as box office managers?
Answers
Answer:
hmmm like in the world?
Explanation:
Answer: a valid amount of people
Explanation:
career question #35 easy
Answers
Given the total cost function TC = 1000 + 10Q - 0.9Q2 + 0.04Q3 ( one thousand plus ten Q - zero point nine Q squared plus zero point zero four Q cubed, the output rate that minimizes Average Variable Cost is 1.125
Select one: True False
Answers
Given the total cost function TC = 1000 + 10Q - 0.9Q2 + 0.04Q3, the output rate that minimizes the Average Variable Cost is 1.125 is false.
The formula for Average Variable Cost (AVC) is: AVC = VC/Q where VC stands for Variable Cost, and Q stands for quantity or output.
The formula for Total Cost (TC) is: TC = FC + VC where FC is Fixed Cost, and VC is Variable Cost. Then, the formula for Average Total Cost (ATC) is: ATC = TC/Q
Therefore, the formula for Average Fixed Cost (AFC) is: AFC = FC/Q
The Average Variable Cost (AVC) formula can be rearranged as: VC = AVC × QIt can be substituted into the Total Cost formula: TC = FC + AVC × Q × QIt can be simplified: TC = FC + AVCQ2The Average Total Cost (ATC) formula can also be written as: ATC = AFC + AVC.
Therefore, the formula for Average Fixed Cost (AFC) can be written as: AFC = ATC - AVC Now, we can calculate the output rate that minimizes Average Variable Cost: AVC = VC/QVC = TC - FCVC = 1000 + 10Q - 0.9Q2 + 0.04Q3 - (1000 + 500)VC = 10Q - 0.9Q2 + 0.04Q3 - 500The marginal cost formula can be derived from the Total Cost formula:
MC = dTC/dQMC = d/dQ(1000 + 10Q - 0.9Q2 + 0.04Q3)MC = 10 - 1.8Q + 0.12.
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How much will we end up buying?
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57Q. Any and all marketing must be pre-approved by your:
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Regarding the statement "any and all marketing must be pre-approved by your," it usually means that the company or organization has strict guidelines and protocols in place when it comes to marketing their products or services. This could be to ensure consistency in messaging and branding, as well as to comply with legal requirements.
In such cases, any marketing materials, whether it be digital, print, or otherwise, must be submitted for review and approval by a designated person or team within the company. This process may involve a review of the content, design, and overall message of the marketing materials, to ensure that they are aligned with the company's values and goals.
Depending on the size and complexity of the organization, the pre-approval process may involve multiple levels of review and sign-off. This may include marketing managers, legal teams, and executives, among others. By requiring pre-approval, companies can ensure that their marketing efforts are effective, compliant, and aligned with their overall objectives.
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Note- The question seems to be incomplete, The complete question isn't available on the search engine.
MVGOY TUI Neuleen U12 QUESTION 4 of 10: You save $500 in a retirement account at age 25. It increases an average of 10% per year until you are 65. Which formula and result indicates how much money you will have in this account at age 65?
Answers
Answer:
Future value at age of 65 = $22,626.5 (Approx.)
Explanation:
Given:
Amount deposit in retirement account = $500
Number of year = 65 year - 25 year = 40
Average rate of increase = 10 %
Find:
Future value at age of 65
Computation:
A = P[1+r]ⁿ
Future value at age of 65 = Amount deposit in retirement account[1+Average rate of increase]ⁿ
Future value at age of 65 = 500[1 + 10%]⁴⁰
Future value at age of 65 = 500[1 + 0.10]⁴⁰
Future value at age of 65 = 500[1.10]⁴⁰
Future value at age of 65 = 500[45.259]
Future value at age of 65 = $22,626.5 (Approx.)
_____provided deposit insurance to depositors in us banks in order to restore trust in the american banking system.
Answers
The Federal Deposit Insurance Corporation (FDIC) provided deposit insurance to depositors in US banks to restore trust in the American banking system. With the FDIC, confidence in the American banking system will recover.
Insurance is an agreement between two or more people in which the insured party pays contributions/contributions/premiums to receive compensation for the risk of loss, damage, or loss, which may occur as a result of unexpected events. Insurance cannot eliminate the risk of unexpected events occurring, but insurance can reduce the impact of losses arising from these events, whether on a small or large scale. Now insurance has become part of financial planning for some people for the long term.
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mlo delaney has started an application for applicant cole. it is a violation of trid if she collects any fees before she provides cole with a loan estimate with the exception of the collection of a(n)
Answers
The incorrect application of the daily interest component, the application of penalty costs that exceed TILA limits, and the creditor's failure to appropriately disclose the APR and financing charge are a few instances of TILA violations.
What Is the Truth in Lending Act (TILA)?The Truth in Lending Act (TILA) is a federal statute that was passed in 1968 to aid in defending customers while dealing with creditors and lenders. Federal Reserve Board regulations have been used to execute the TILA.The annual percentage rate (APR), the length of the loan, and the overall costs to the borrower are some of the information that must be revealed to a borrower before giving credit. This information must be clearly displayed on all documents that the borrower is presented with before signing them, as well as occasionally on the periodic billing statements that the borrower receives.To Learn more About TILA limits Refer TO:
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How does the Marketing function affect the other departments❓❓❓❓
Answers
it makes sure the sales department are selling services the customers are looking for or are the trend, affecting the salary as well.
The Greek government decides to introduce new austerity measures, which reduce government direct spending by $16 billion. Greece has a marginal propensity to consume of 0.6. What will be the final change in real GDP as a result of this decreased spending? Please give your answer as a whole number in billions of dollars.
Answers
Answer:
-$40 billion
Explanation:
Given that
Reduction in government spending = $16 billion
Marginal propensity to consume = 0.6
Change in spending = $16 billion
Based on the above information
As we know that
Multiplier = 1 ÷ (1 - MPC)
= 1 ÷ (1 - 0.06)
= 1 ÷ 0.4
= 2.5
Now
The final change in real GDP is
= Multiplier × Change in spending
= 2.5 × -$16 billion
= -$40 billion
The face value of a bond is the ____.
a.
amount for which it sells
b.
amount it is worth when it is issued
c.
amount it pays at maturity
d.
purchase price plus its yield
Please select the best answer from the choices provided
A
B
C
D
Answers
Answer:
c
Explanation:
Answer:
the answer is B
Explanation:
did it on edge