Figure 12.1: Selected information for Crane Manufacturing Inc.
$$\begin{array} { | l | c | c | }
\hline & \text { ALL EQUTTY } & \text { EQUTYY AND DEBT } \
\hline & & \
\hline \text { Number of shares } & 500,000 & 300,000 \
\hline \text { Interest expense } & \$ 0 & \$ 100,000 \
\hline \text { Tax rate } = 30 \% & & \
\hline
\end{array}$$
-Calculate an EBIT break-even between a debt firm (DF)and an all-equity firm (EF)based on the following information: DF interest = $60,000,DF number common shares = 5,000,EF number of common shares = 12,000,and tax rate = 40 percent.
A)EBIT = $234,547 and EPS = 10.35
B)EBIT = $146,312 and EPS = $7.02
C)EBIT = $102,857 and EPS = $5.14
D)EBIT = $91,217 and EPS = $4.18

Question

Figure 12.1: Selected information for Crane Manufacturing Inc.
$$\begin{array} { | l | c | c | } 
\hline & \text { ALL EQUTTY } & \text { EQUTYY AND DEBT } \
\hline & & \
\hline \text { Number of shares } & 500,000 & 300,000 \
\hline \text { Interest expense } & \$ 0 & \$ 100,000 \
\hline \text { Tax rate } = 30 \% & & \
\hline
\end{array}$$
-Calculate an EBIT break-even between a debt firm (DF)and an all-equity firm (EF)based on the following information: DF interest = $60,000,DF number common shares = 5,000,EF number of common shares = 12,000,and tax rate = 40 percent.
A)EBIT = $234,547 and EPS = 10.35
B)EBIT = $146,312 and EPS = $7.02
C)EBIT = $102,857 and EPS = $5.14
D)EBIT = $91,217 and EPS = $4.18

Quizplus · Accepted Answer

The Answer is C

Figure 121: Selected Information for Crane Manufacturing Inc -Calculate an EBIT Break-Even Between a Debt Firm (DF)and an |