Written Assignment 6 - P13-11 EPS calculations Southland...

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P13-11EPS calculationsSouthland Industries has $60,000 of 16% (annual interest) bonds outstanding, 1,500shares of preferred stock paying an annual dividend of $5 per share, and 4,000 sharesof common stock outstanding. Assuming that the firm has a 40% tax rate, compute earnings per share (EPS) for the following levels of EBIT.ANSWERa.$24,600
b.$30,600
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P13-16Integrative: Leverage and riskFirm R has sales of 100,000 units at $2.00 per unit, variable operating costs of $1.70per unit, and fixed operating costs of $6,000. Interest is $10,000 per year. Firm W has sales of 100,000 units at $2.50 per unit, variable operating cost of $1.00 per unit, andfixed operating costs of $62,500. Interest is $17,500 per year. Assume that both firmsare in the 40% tax braket.a.Compute the degree of operating, financial, and total leverage for firm R.$2.00-$1.7
b.Compute the degree of operating, financial, and total leverage for firm W.
c.Compare the relative risk of the two firms.100,000=1.71.25=1?
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P13-20Dept and financial riskTower Interiors has made the forecast of sales shown in the following table. Also givenis the probability of each level of sales.SalesProbability$200,000 0.20300,0000.60400,0000.20The firm has fixed operating costs of $75,000 and available operating costs equal to 70% ofthe sales level. The company pays $12,000 in interest per period. he tax rate is 40%.

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