​(​EBIT-EPS analysis​) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture. The investors have pr

​(​EBIT-EPS analysis​) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture. 

The investors have proposed two financing plans: 

Plan A is an​ all-common-equity alternative. Under this​ agreement, 1.6 million common shares will be sold to net the firm $10 per share. 

Plan B involves the use of financial leverage. A debt issue with a​ 20-year maturity period will be privately placed. 

The debt issue will carry an interest rate of 9 ​percent, and the principal borrowed will amount to ​$1.6 million. 

The marginal corporate tax rate is 25 percent.

a. Find the EBIT indifference level associated with the two financing proposals.

b. Prepare a pro forma income statement that proves EPS will be the same regardless of the plan chosen at the EBIT level found in part a.

c. Prepare an​ EBIT-EPS analysis chart for this situation.

d. If a detailed financial analysis projects that​ long-term EBIT will always be close to ​$1.94 million​ annually, which plan will provide for the higher​ EPS?

e. If you were to present the results of your analysis found in part a through d​, how would you summarize your findings to your​ employer?

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10