0% Plagiarism Guaranteed & Custom Written

Finance Problem:Earnings and Leverage

05 / 03 / 2018 Assignment

This paper circulates around the core theme of Finance Problem:Earnings and Leverage 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.

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

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 $ $

If both scenarios are equally likely, what is expected (i.e., average) EPS under each financing mix? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Earnings Per Share
Low-debt plan $
High-debt plan

b-3. Is the high-debt mix preferable?


Suppose that EBIT is $117,600. What is EPS under each financing mix? (Round your answers to 2 decimal places.)

Earnings Per Share
Low-debt plan $
High-debt plan

100% Plagiarism Free & Custom Written

International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

Company # 11483120


We've produced some samples of what you can expect from our Academic Writing Service - these are created by our writers to show you the kind of high-quality work you'll receive. Take a look for yourself!

View Our Samples

Benefits You Get

  • Free Turnitin Report
  • Unlimited Revisions
  • Installment Plan
  • 24/7 Customer Support
  • Plagiarism Free Guarantee
  • 100% Confidentiality
  • 100% Satisfaction Guarantee
  • 100% Money-Back Guarantee
  • On-Time Delivery Guarantee
FLAT 25% OFF ON EVERY ORDER. Use "FLAT25" as your promo code during checkout