Quiz3_B(Answers)

Ta 1500000 intrate 70 t 350 bep 03 ebit 03

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Unformatted text preview: ted ROE if it finances entirely with common stock? TA = 1,500,000 Int. rate = 7.0% T = 35.0% BEP = 0.3 EBIT = 0.3 * 1500000 = 450,000 Finance with debt D/A = Equity = 1500000 * (1 ‐ 0.6) = Debt = Interest = EBT = Tax = NI = ROE = Difference in ROE = Finance with common stock D/A = Equity = 1500000 * (1 ‐ 0) = Debt = Interest = EBT = Tax = NI = ROE = 0.6 600,000 900,000 63,000 387,000 135,450 251,550 41.9% 22.4% ‐ 1,500,000 ‐ ‐ 450,000 157,500 292,500 19.5% 2. (2 points) Is an initial public offer...
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