Top Down is a levered firm with assets valued at $300-000- has $75-000.docx
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4 Feb 2023•0 j'aime•3 vues
Top Down is a levered firm with assets valued at $300-000- has $75-000.docx
4 Feb 2023•0 j'aime•3 vues
Signaler
Formation
Top Down is a levered firm with assets valued at $300,000, has $75,000 of debt issued at 7% interest, and 5,000 shares of stock outstanding. Suppose that earnings before interest and tax (EBIT) is $11,000 and that corporate profits are subject to a tax rate of 25%. Which of the following comes closest to the EPS of Top Down? a. $1.31 b. $1.17 c. $4.20 d. $0.00 e. $0.86 Solution Answer= e. $0.86 .
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Top Down is a levered firm with assets valued at $300-000- has $75-000.docx
- 1. Top Down is a levered firm with assets valued at $300,000, has $75,000 of debt issued at 7% interest, and 5,000 shares of stock outstanding. Suppose that earnings before interest and tax (EBIT) is $11,000 and that corporate profits are subject to a tax rate of 25%. Which of the following comes closest to the EPS of Top Down? a. $1.31 b. $1.17 c. $4.20 d. $0.00 e. $0.86 Solution Answer= e. $0.86 Calculation of EPS( Earning per share) Particulars Amount in $ Earnings before interest and tax (EBIT) 11000.00 Less
- 2. Interest on debt @7% on $75000 5250.00 Earning after interest and before tax 5750.00 Less-25% taxes on $5750 1437.50 Profit after taxes 4312.50 Number of share outstanding 5000 Earning per share Profit after taxes/ number of outstanding shares Earning per share 0.86