The Lopez-Portillo Company has $11.5 million in assets, 70 percent financed by debt and 30 percent financed by common stock. The interest rate on the debt is 13 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $22.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 16 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 40 percent. a. If EBIT is 12 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives. (Round your answers to 2 decimal places.) b. What is the degree of financial leverage under each of the three plans? (Round your answers to 2 decimal places.) c. If stock could be sold at $20 per share due to increased expectations for the firm’s sales and earnings, what impact would this have on earnings per share for the two expansion alternatives? Compute earnings per share for each. (Round your answers to 2 decimal places.)
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Need today! will get brainliest for right answer! compare and contrast absolute advantage and comparative advantage.
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Business, 22.06.2019 17:00
Jillian wants to plan her finances because she wants to create and maintain her tax and credit history. she also wants to chart out all of her financial transactions for the past federal fiscal year. what duration should jillian consider to calculate her finances? from (march or january )to (december or april)?
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Anewspaper story on the effect of higher milk prices on the market for ice cream contained the following: "as a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . and ice cream consumption is down 3 percent." source: john curran, "ice cream, they scream: milk fat costs drive up ice cream prices," associated press, july 23, 2001. based on the information given, what is the price elasticity of demand for ice cream?
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The Lopez-Portillo Company has $11.5 million in assets, 70 percent financed by debt and 30 percent f...
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