# 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.

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

b-2.
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?

Yes
No

c.
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

## STILL NOT CONVINCED?

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
• Plagiarism Free Guarantee
• 100% Confidentiality
• 100% Satisfaction Guarantee
• 100% Money-Back Guarantee
• On-Time Delivery Guarantee

+44 7340 9595 39
+44 20 3239 6980
[email protected]
AKOSZTEC “International House, 12 Constance Street, London, United Kingdom, E16 2DQ”

Hire Researcher
Rated 4.7/5 based on 8956 Reviews

## Supporting Pages

FLAT 25% OFF ON EVERY ORDER. Use "FLAT25" as your promo code during checkout