Business, 16.10.2020 14:01, addisonborden

Minion, Inc., has no debt outstanding and a total market value of $211,875. Earnings before interest and taxes, EBIT, are projected to be $14,300 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 35 percent lower. The company is considering a $33,900 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,500 shares outstanding. Assume the company has a tax rate of 21 percent. Required:
a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.
b. Calculate the percentage changes in EPS when the economy expands or enters a recession.
c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.
d. Calculate the percentage changes in EPS when the economy expands or enters a recession assuming recapitalization has occurred.

Answers: 3

Show answers

Answers

answered: nyceastcoast

EPS and percentage change is calculated below

Explanation:

Earnings per share (EPS) is the monetary value of earnings per outstanding share of common stock for a company.

a.EPS

Recession Normal Expansion

EBIT 9,295 14,300 17,160

Less: Interest 0 0 0

Earnings before taxes9,295 14,300 17,160

Less: Taxes (1,952) (3,003) (3,604 )

Net Income 7,343 11,297 13,556

Number of Shares 7,500 7,500 7,500

EPS 0.979073 1.506267 1.80752

b. Percentage change

Recession = (2.683-3.833)/3.833

Recession = -35.00%

Expansion20.00%

c. EPS

RecessionNormalExpansion

EBIT 9,295 14,300 17,160

Less: Interest (2034) (2034) (2034 )

Earnings before taxes 7,261 12,266 15,126

Less: Taxes (1,525) (2,576) (3,176 )

Net Income 5,736 9,690 11,950

Number of Shares 6,300 6,300 6,300

EPS 0.91 1.53 1.89

d. Percentage change

Recession = (2.683-3.833)/3.833

Recession = -40.80%

Expansion23.32%

Value per share = 211875/7500 = $28.25

Number of shares bought back = 33900/28.25 = 1200 shares

answered: Guest

i this its 7 years i hope this

answered: Guest

Iam style 300 words your features choice clothes information based which performance

Other questions on the subject: Business

Business, 21.06.2019 20:00, akamya21

The maximum tax rate on estates and gifts

Answers: 1

continue

Business, 21.06.2019 21:30, Taylor73836

Alandowner entered into a written agreement with a real estate broker whereby the broker would receive a commission of 10% of the sale price if he procured a "ready, willing, and able buyer" for the landowner's property and if the sale actually proceeded through closing. the broker found a buyer who agreed in writing to buy the property from the landowner for $100,000, the landowner's asking price. the buyer put up $6,000 as a down payment. the agreement between the landowner and the buyer contained a liquidated damages clause providing that, if the buyer defaulted by failing to tender the balance due of $94,000 at the closing date, damages would be 10% of the purchase price. the landowner included that clause because she was counting on using the proceeds of the sale for a business venture that would likely net her at least $10,000. the buyer became seriously ill and defaulted. when he recovered, he demanded that the landowner return his $6,000, and the landowner refused. the broker also demanded the $6,000 from the landowner and was refused. the broker and the buyer filed separate suits against the landowner, with the buyer pleading impossibility of performance. the two cases are consolidated into a single case. how should the court rule as to the disposition of the $6,000?

Answers: 3

continue

Business, 21.06.2019 22:30, izzybellee20004

Before contacting the news or print media about your business, what must you come up with first ? a. a media expertb. a big budgetc. a track recordd. a story angle

Answers: 1

continue

Business, 22.06.2019 08:30, franstirlacci

Uppose that the federal reserve purchases a bond for $100,000 from donald truck, who deposits the proceeds in the manufacturer’s national bank. what will be the impact of this purchase on the supply of money? the money supply will increase by $100,000. the money supply will increase by $80,000. the money supply will increase by $500,000. this action will have no effect on the money supply. if the reserve requirement ratio is 20 percent, what is the maximum amount of additional loans that the manufacturer’s bank will be able to extend as the result of truck’s deposit? the maximum additional loans is $100,000. the maximum additional loans is $80,000. the maximum additional loans is $20,000. the maximum additional loans is $500,000. given the 20 percent reserve requirement, what is the maximum increase in the quantity of checkable deposits that could result throughout the entire banking system because of the fed’s action? this action will have no effect on the money supply. the money supply will eventually increase by $80,000. the money supply will eventually increase by $500,000. the money supply will eventually increase by $100,000.

Answers: 1

continue

Do you know the correct answer?

Minion, Inc., has no debt outstanding and a total market value of $211,875. Earnings before interest...