Please EXPLAIN how you get the answer to the following equation. ?I am stuck on simple math / algebra where I set each equation to equal one another.
1) Plan A is an all-common-equity structure in which 2.2 million dollars would be raised by selling 84,000 shares of common stock
2) Plan B would involve issuing 1.4 million long-term bonds with an effective interest rate of 11.6 percent plus another 0.8 millioin would be raised by selling 42,000 shares of common stock. ?The debt raised under Plan B has no fixed maturity date, in that this amount of financial leverage is considered a permamnent part of the firm's capital structure.
Both plans use a 38% tax rate in their analysis.
1. find the EBIT indifference level associated with the two financing plans
2. prepare a pro forma income statement for the ebit level solved for in part a that shows the eps will be the same regardless whether plan A or B is chosen.
(((X - $0) (1 - 38%) - $0) / 84,000) = (((X - $162,400) (1 - 38%) - $0) / 42,000)
(0.62X / 84,000) = (0.62X - $100,688) / $42,000...
This question was answered on: Oct 07, 2020Buy this answer for only: $15
This attachment is locked
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Oct 07, 2020EXPERT
GET INSTANT HELP/h4>
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
NEW ASSIGNMENT HELP?
Order New Solution. Quick Turnaround
Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.
WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.