Recent Question

What is Marcus's degree of operating leverage in sales dollars . Quick Launch Rocket Company, a satellite launching firm, expects its sales to increase by 50 percent in the coming year as a result of NASA's recent problems with the space shuttle. The firm's current EPS is $3.25. Its degree of operating leverage is 1.6, while its degree of financial leverage is 2.1. What is the firm's projected EPS for the coming year using the DTL appr ...

Other / Other 26 May 2016

What price must the division charge in order to break even . Which of the following is correct? a. Generally, debt to total assets ratios do not vary much among different industries although they do vary for firms within a particular industry. b. Utilities generally have very high common equity ratios due to their need for vast amounts of equity-supported capital. c. The drug industry has a high debt to common equity ratio because t ...

Other / Other 26 May 2016

What would be the company’s earnings per share Financial analysts for Naulls Industries have revealed the following information about the company: • Naulls Industries currently has a capital structure that consists of 75 percent common equity and 25 percent debt. • The risk-free rate, kRF, is 5 percent. • The market risk premium , kM - kRF, is 6 percent. • Naulls’s common stock has a beta of 1.2. ...

Other / Other 26 May 2016

Which of the following statements about capital structure theory is most correct . Which of the following statements about capital structure theory is most correct ? a. Signaling theory suggests firms should in normal times maintain reserve borrowing capacity that can be used if an especially good investment opportunity comes along. b. In general, an increase in the corporate tax rate would cause firms to use less debt in their capit ...

Other / Other 26 May 2016

Which of the following factors is likely to encourage a company to increase its debt ratio . Which of the following statements is likely to encourage a firm to increase its debt ratio in its capital structure? a. Its sales become less stable over time. b. Its corporate tax rate declines. c. Management believes that the firm’s stock is overvalued. d. Statements a and b are correct. e. None of the statements above is correct. ...

Other / Other 26 May 2016

What will be its estimated stock price after the capital structure change . A consultant has collected the following information regarding Young Publishing: Total assets $3,000 million Tax rate 40% Operating income (EBIT) $800 million Debt ratio 0% Interest expense $0 million WACC 10% Net income $480 million M/B ratio 1.00× Share price $32.00 EPS = DPS $3.20 The company has no growth op ...

Other / Other 26 May 2016

The degree of operating leverage has which of the following characteristics . Which of the following statements is most correct? a. All else being equal, an increase in a firm's fixed costs will increase its degree of operating leverage. b. Firms that have large fixed costs and low variable costs have a higher degree of financial leverage than do firms with low fixed costs and high variable costs. c. If a firm's net income rises 10 ...

Other / Other 26 May 2016

What is Milbrett’s expected earnings per share following the recapitalization Currently, the Fotopoulos Corporation’s balance sheet is as follows: Assets $5 billion Debt $1 billion Common equity 4 billion Total assets $5 billion Total debt & common equity $5 billion The book value of the company (both debt and common equity) equals its market value (both debt and common equity). Furthermore, the compa ...

Other / Other 26 May 2016

The firm’s target capital structure is consistent with which of the following . From the information below, select the optimal capital structure for Minnow Entertainment Company. a. Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50. b. Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90. c. Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20. d. Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $ ...

Other / Other 26 May 2016

What is the level of the company’s fixed operating costs . Assume that a firm has a degree of financial leverage of 1.25. If sales increase by 20 percent, the firm will experience a 60 percent increase in EPS, and it will have an EBIT of $100,000. What will be the EBIT for this firm if sales do not increase? a. $113,412 b. $100,000 c. $ 84,375 d. $ 67,568 e. $ 42,115 . Kulwicki Corporation wants to determine the effec ...

Other / Other 26 May 2016