Capital Structure and Leverage 10

Capital Structure and Leverage 10 - Fix ed Costs -$500,000....

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Old Exam Questions - Capital Structure and Leverage Page 10 of 31 Pages Fixed Costs -$500,000.00 Fixed Costs -$600,000.00 EBIT $500,000.00 EBIT $2,400,000.00 Interest -$100,000.00 Interest -$150,000.00 EBT $400,000.00 EBT $2,250,000.00 Taxes (40%) -$160,000.00 Taxes (40%) -$900,000.00 Net Income $240,000.00 Net Income $1,350,000.00 NI Breakeven NI Breakeven A. EBIT Breakeven = 400,000 units and NI Breakeven = 500,000 units B. EBIT Breakeven = 420,000 units and NI Breakeven = 510,000 units C. EBIT Breakeven = 440,000 units and NI Breakeven = 520,000 units D. EBIT Breakeven = 460,000 units and NI Breakeven = 530,000 units E. EBIT Breakeven = 480,000 units and NI Breakeven = 540,000 units 12. Your company is financed entirely by common stock that is priced to offer a 10% annual expected/required rate of return. If the company repurchases 40% of its common stock and substitutes an equal value of debt, its levered cost of equity will
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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