The Lopez-Portillo Company has $11.3 million in assets, 90 percent financed by debt, and 10 percent financed by common stock. The interest rate on the debt is 10 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $21.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 10 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 30 percent.
a. If EBIT is 11 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives
Earnings Per Share
Current $
Plan A $
Plan B $
b. What is the degree of financial leverage under each of the three plans? (Round your answers to 2 decimal places.)
Degree Of
Financial Leverage
Current
Plan A
Plan B
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.)
Earnings Per Share
Plan A $
Plan B $

The following selected circumstances relate to pending lawsuits for erismus, inc. erismus’s fiscal year ends on december 31. financial statements are issued in march 2019. erismus prepares its financial statements according to u.s. gaap. required: indicate the amount erismus would record as an asset, liability, or not accrued in the following circumstances. 1. erismus is defending against a lawsuit. erismus's management believes the company has a slightly worse than 50/50 chance of eventually prevailing in court, and that if it loses, the judgment will be $1,000,000. 2. erismus is defending against a lawsuit. erismus's management believes it is probable that the company will lose in court. if it loses, management believes that damages could fall anywhere in the range of $2,000,000 to $4,000,000, with any damage in that range equally likely. 3. erismus is defending against a lawsuit. erismus's management believes it is probable that the company will lose in court. if it loses, management believes that damages will eventually be $5,000,000, with a present value of $3,500,000. 4. erismus is a plaintiff in a lawsuit. erismus's management believes it is probable that the company eventually will prevail in court, and that if it prevails, the judgment will be $1,000,000. 5. erismus is a plaintiff in a lawsuit. erismus’s management believes it is virtually certain that the company eventually will prevail in court, and that if it prevails, the judgment will be $500,000.

If jobs have been undercosted due to underallocation of manufacturing overhead, then cost of goods sold (cogs) is too low and which of the following corrections must be made? a. decrease cogs for double the amount of the underallocation b. increase cogs for double the amount of the underallocation c. decrease cogs for the amount of the underallocation d. increase cogs for the amount of the underallocation

On september 1, 2016, steve loaned brett $2,000 at 12% interest compounded annually. steve is not in the business of lending money. the note stated that principal and interest would be due on august 31, 2018. in 2018, steve received $2,508.80 ($2,000 principal and $508.80 interest). steve uses the cash method of accounting. what amount must steve include in income on his income tax return?