Business, 17.06.2020 23:57 sammybrain
Reliable Gearing currently is all-equity-financed. It has 18,000 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 $280,000 with the proceeds used to buy back stock. The high-debt plan would exchange $480,000 of debt for equity. The debt will pay an interest rate of 12%. The firm pays no taxes.
A. What will be the debt-to-equity ratio if it borrows $280,000?
B. If earnings before Interest and tax (EBIT) are $190,000, what will be earnings per share (EPS) If Reliable borrows $280,000?
C. What will EPS be if it borrows $480,000?
Answers: 1
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Reliable Gearing currently is all-equity-financed. It has 18,000 shares of equity outstanding, selli...
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