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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