Integrative-Optimal capital structure Medallion Cooling Systems, Inc., has total assets of $10,400,000, EBIT of $1,950,0
Posted: Mon Jan 17, 2022 8:09 am
- Integrative Optimal Capital Structure Medallion Cooling Systems Inc Has Total Assets Of 10 400 000 Ebit Of 1 950 0 1 (76.19 KiB) Viewed 56 times
Integrative-Optimal capital structure Medallion Cooling Systems, Inc., has total assets of $10,400,000, EBIT of $1,950,000, and preferred dividends of $200,000 and is taxed at a rate of 40%. In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment: Capital structure debt ratio 0% 15 30 45 60 Cost of debt, rd 0% 8.3 8.8 11.9 14.8 Number of common stock shares 197,000 166,000 135,000 110,000 85,000 Required return, rs 11.8% 12.7 13.8 16.2 19.8 a. Calculate earnings per share for each level of indebtedness. b. Use the equation Po=EPS/rs and the earnings per share calculated in part (a) to calculate a price per share for each level of indebtedness. ... a. Calculate earnings per share for each level of indebtedness. Calculate the EPS below: (Round to the nearest dollar. Round the EPS to the nearest cent.) Debt Ratio 0% EBIT $ 1,950,000 $ Less: Interest EBT $ $ $ Taxes @40% Net profit Less: Preferred dividends Profits available to $ common stockholders $ $ 197,000 # shares outstanding EPS $