Howell Enterprises Is Forecasting EPS of $4

question 101

Multiple Choice

Howell Enterprises is forecasting EPS of $4.00 per share for next year.The firm has 10,000 shares outstanding,it pays 12 percent interest on its debt,and it faces a 40 percent marginal tax rate.Its estimated fixed costs are $80,000 while its variable costs are estimated at 40 percent of revenue.The firm's target capital structure is 40 percent equity and 60 percent debt and it has total assets of $400,000.On what level of sales is Howell basing its EPS forecast?

• A) $1,000,000
• B) $480,400
• C) $316,722
• D) $292,445
• E) $105,280

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Definitions:

Reportable Segments

Parts of a company that are distinguishable by their operational activities, products, or services, and require separate financial reporting.

Segment Revenues

The income generated from specific divisions or operational units within a company, allowing for the analysis of each segment's contribution to the overall revenue.

Operating Expenses

Costs associated with running a business's core operations excluding the cost of goods sold, such as rent, utilities, and payroll.

Reportable Segments

This refers to distinct components of a business for which separate financial information is available and is regularly reviewed by the company's decision-makers.