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:

Conglomerate Acquisition

A conglomerate acquisition occurs when a company buys another company in a completely unrelated business sector, aiming for diversification of business interests.

Poison Pill

A defensive strategy used by companies to prevent or discourage hostile takeovers by making the company less attractive to the acquirer.

Golden Parachute

Substantial benefits given to top executives if the company is taken over by another firm, serving as a deterrent for unwanted takeovers.

Unfriendly Takeover

An attempt by one company to acquire control of another company without the consent or cooperation of its management or board of directors.