Two Companies, Jefferson and Jackson, Are Virtually Identical in All

question 5

Multiple Choice

Two companies, Jefferson and Jackson, are virtually identical in all aspects of their operations except that the two companies differ in their capital structures, as shown below. Jefferson
$$\begin{array} { l r r } & \text { Jefferson } & \text { Jackson } \\\text { Debt } ( 10 \% ) & \$ 200 \text { million } & \$ 100 \text { million } \\\text { Common equity } & \$ 300 \text { million } & \$ 400 \text { million } \\\text { No. shares outstanding } & 15 \text { million } & 20 \text { million }\end{array}$$
?
Both companies have $500 million in total assets and both have a 40% marginal tax rate. What is the EPS for Jefferson at an EBIT level of $50 million?

• A) -$1.20
• B) $1.20
• C) $2.20
• D) $3.33

Prepare and analyze production budgets for single and multiple products.

Understand the impact of desired ending inventory levels on production planning and budgeting.

Analyze the effect of sales forecasts on production and budgeting decisions.

Determine the budgeted cost of goods manufactured by considering direct materials, direct labor, and factory overhead costs.