Litho-Print is considering two possible capital structures, A and B, shown in the following table. Assume a 40% tax rate. Source of Capital Long-term debt Structure A $75,000 at 16% coupon | $50,000 at 15% coupon Structure B rate rate $15,000 with an 18% annual dividend 10,000 Preferred stock $10,000 with an 18% annual dividend Common stock a. Calculate two EBIT-EPS coordinators for each of the structures for EBIT values of $30,000 8,000 shares and $50,000 with their associated EPS values.
Litho-Print is considering two possible capital structures, A and B, shown in the following table. Assume a 40% tax rate. Source of Capital Long-term debt Structure A $75,000 at 16% coupon | $50,000 at 15% coupon Structure B rate rate $15,000 with an 18% annual dividend 10,000 Preferred stock $10,000 with an 18% annual dividend Common stock a. Calculate two EBIT-EPS coordinators for each of the structures for EBIT values of $30,000 8,000 shares and $50,000 with their associated EPS values.
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 1P
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Transcribed Image Text:Litho-Print is considering two possible capital structures, A and B, shown in the following table.
Assume a 40% tax rate.
Source of Capital
Long-term debt
Structure A
$75,000 at 16% coupon | $50,000 at 15% coupon
Structure B
rate
rate
$15,000 with an 18%
annual dividend
10,000
Preferred stock
$10,000 with an 18%
annual dividend
Common stock
a. Calculate two EBIT-EPS coordinators for each of the structures for EBIT values of $30,000
8,000 shares
and $50,000 with their associated EPS values.
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