Leverage and sensitivity analysis

[tbeck4]

The beck company has $10 million in assets, 80 percent financed by debt and 20 percent financed by common stock. The interest rate on the debt is 15 percent and the par value of the stock is $10 per share. the President is considering two financing plans for an expansion to $15 million in assets.
Under plan A the debt-to-tota asset ratio will be maintained, but new debt will cost a whopping 18 percent! Under plan B only new common stock at $10 per share will be issued. The tax rate is 40 percent.

a. IF EBIT is 15 percent on total assets, compute earnings per share before the expansion and under two alternatives.

[Gok Wan]

Yawn.....another person who can't be @rsed to do their own homework.

At least admit that is what it is and ask nicely with the words PLEASE and THANK YOU.