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NEW QUESTION: 1
Copybold Corporation is a start-up firm considering two alternative capital structures--one is conservative and the other aggressive. The conservative capital structure calls for a D/A ratio = 0.25, while the aggressive strategy call for D/A = 0.75. Once the firm selects its target capital structure it envisions two possible scenarios for its operations: Feast or Famine. The Feast scenario has a 60 percent probability of occurring and forecast EBIT in this state is $60,000. The Famine state has a 40 percent chance of occurring and the EBIT is expected to be $20,000. Further, if the firm selects the conservative capital structure its cost of debt will be 10 percent, while with the aggressive capital structure its debt cost will be
12 percent. The firm will have $400,000 in total assets, it will face a 40 percent marginal tax rate, and the book value of equity per share under either scenario is $10.00 per share. What is the difference between the EPS forecasts for Feast and Famine under the aggressive capital structure?
A. $2.40
B. $1.00
C. $0
D. $1.80
E. $2.20
Answer: A
Explanation:
Explanation/Reference:
Explanation:
Debt = 75% = $300,000; Equity = 25% = $100,000; Total assets = $400,000.
FeastFamine
Probability0.60.4
EBIT$60,000$20,000
Less: Interest36,00036,000
EBT$24,000-$16,000
Less: Taxes9,600-6,400
NI$14,400-$9,600
# shares10,00010,000
EPS$1.44-$0.96
Difference in EPS for conservative capital structure:
EPS(Feast) - EPS(Famine) = $1.44 - (-$0.96) = $2.40
NEW QUESTION: 2
Refer to the exhibit.
The STP priority of N7K-1 and N7K-2 are the lowest in the network. Which statement describes STP on the vPC?
A. N7K-2 appears as the STP root.
B. N7K-1 appears as the STP root.
C. N7K-1 and N7K-2 appear as a single STP root.
D. N7K-1 preempts N7K-2 as the STP root.
Answer: C
NEW QUESTION: 3
Match the Azure Cloud Services benefit to the correct description.
Instructions: To answer, drag the appropriate benefit from the column on the left to its description on the right. Each benefit may be used once, more than once, or not at all.
NOTE: Each correct match is worth one point.
Answer:
Explanation:
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