The board of directors of LuvMe Publishing Haus has commissioned a capital structure study. The company has a total assets of P59 million. It has earnings before interest and taxes (EBIT) of P9.0 million and is taxed at 25%. The stock has a book value of P25 per share. Additional information follows: Percentage of Debt Cost of Debt Required Rate of Return 0% 0% 10.0% 20% 8.5% 10.9% 30% 9.5% 11.5% 60% 15.0% 16.5% Based on the above information using the debt ratio given, prepare the schedule to answer the following: Earnings per share (EPS) Return on Equity (ROE) Price - Earnings ratio
The board of directors of LuvMe Publishing Haus has commissioned a capital structure study. The company has a total assets of P59 million. It has earnings before interest and taxes (EBIT) of P9.0 million and is taxed at 25%. The stock has a book value of P25 per share. Additional information follows: Percentage of Debt Cost of Debt Required Rate of Return 0% 0% 10.0% 20% 8.5% 10.9% 30% 9.5% 11.5% 60% 15.0% 16.5% Based on the above information using the debt ratio given, prepare the schedule to answer the following: Earnings per share (EPS) Return on Equity (ROE) Price - Earnings ratio
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 12PROB
Related questions
Question
The board of directors of LuvMe Publishing Haus has commissioned a capital structure study. The company has a total assets of P59 million. It has earnings before interest and taxes (EBIT) of P9.0 million and is taxed at 25%. The stock has a book value of P25 per share.
Additional information follows:
|
Percentage of Debt |
Cost of Debt |
Required |
|
0% |
0% |
10.0% |
|
20% |
8.5% |
10.9% |
|
30% |
9.5% |
11.5% |
|
60% |
15.0% |
16.5% |
Based on the above information using the debt ratio given, prepare the schedule to answer the following:
- Earnings per share (EPS)
Return on Equity (ROE)- Price - Earnings ratio
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
