River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share $ 10 Market value of shares $ 1,000,000 Outcomes State of the Economy Slump Normal Boom Profits before interest $ 83,500 $ 142,000 $ 203,500 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.) Data Number of shares 100,000 Price per share $10 Market value of shares $10 Market value of debt $1,000,000 Outcomes State of the Economy Slump Normal Boom Profits before interest $83,500 $142,000 $203,500 Interest $25,000 $25,000 $25,000 Equity earnings $58,500 $117,000 $178,500 Earnings per share $(0.065) $(0.130) $(0.198) Return on shares (0.01) % (0.01) % (0.02) % Expected Outcome I put everything into excel, but I went wrong somewhere

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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River Cruises is all-equity-financed.

	Current Data
Number of shares		100,000
Price per share	$	10
Market value of shares	$	1,000,000
Outcomes
	State of the Economy
	Slump	Normal	Boom
Profits before interest	$	83,500		$	142,000	$	203,500

Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.)

	Data
Number of shares	100,000
Price per share	$10
Market value of shares	$10
Market value of debt	$1,000,000
Outcomes
	State of the Economy
	Slump	Normal	Boom
Profits before interest	$83,500		$142,000		$203,500
Interest	$25,000		$25,000		$25,000
Equity earnings	$58,500		$117,000		$178,500
Earnings per share	$(0.065)		$(0.130)		$(0.198)
Return on shares	(0.01)	%	(0.01)	%	(0.02)	%
	Expected Outcome

I put everything into excel, but I went wrong somewhere

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