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Category > Business & Finance Posted 20 Jun 2017 My Price 8.00

6. The Tanenbaum Tea Company wants to show

6.   The Tanenbaum Tea Company wants to show the stock market an EPS of $3 per share, but doesn’t expect to be able to improve profitability over what is reflected in the financial plan for next year. The plan is partially reproduced below.

 

Tanenbaum Tea Company Financial Projection 20x1 ($000)

 

EBIT

$18,750

Debt

$ 13,000

Interest (@ 12%)

1,560

Equity

97,000

EBT

$ 17,190

Capital

$110,000

Tax (@ 40%)

6,876

 

 

EAT                                       $10,314            Number of shares = 3,700,000

 

Tanenbaum’s stock sells at book value. Will trading equity for debt help the firm achieve its EPS goal, and if so, what debt level will produce the desired EPS?

 

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Status NEW Posted 20 Jun 2017 07:06 AM My Price 8.00

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