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f earnings before interest and tax (EBIT) will be either $65,000 or $185,000, what will be earnings per share for each financing mix for both possible values of EBIT?

05 / 03 / 2018 Assignment

This paper circulates around the core theme of f earnings before interest and tax (EBIT) will be either $65,000 or $185,000, what will be earnings per share for each financing mix for both possible values of EBIT? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 45. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.

Reliable Gearing currently is all-equity-financed. It has 12,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $210,000 with the proceeds used to buy back stock. The high-debt plan would exchange $500,000 of debt for equity. The debt will pay an interest rate of 9.8%. The firm pays no taxes.

a.
What will be the debt-to-equity ratio after each contemplated restructuring? (Round your answers to 2 decimal places.)

Debt-to-Equity Ratio
Low-debt plan
High-debt plan

b-1.
If earnings before interest and tax (EBIT) will be either $65,000 or $185,000, what will be earnings per share for each financing mix for both possible values of EBIT? (Round your answers to 2 decimal places.)

Earnings Per Share
EBIT Low-Debt Plan High-Debt Plan
$65,000 $ $
$185,000


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