A Firm Is Expected to Generate $1

question 55

Multiple Choice

A firm is expected to generate $1.5 million in operating income and pay $250,000 in interest.Ignoring taxes,this will generate $12.50 earnings per share.What will happen to EPS if operating income increases by 33.3% to $2.0 million?

• A) EPS increases by 25% to $15.63.
• B) EPS increases by 33.3% to $16.67.
• C) EPS increases by 40% to $17.50.
• D) EPS increases by 60% to $20.00.

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Definitions:

Determination

Often associated with the coefficient of determination (R-squared), it measures the proportion of variance in the dependent variable predictable from the independent variable(s).

Degrees of Freedom

The number of independent values or quantities that can vary in an analysis without breaking any constraints.

Critical Value

A value that is compared with the test statistic to determine whether H0 should be rejected.

Independent Variables

Factors that are manipulated or changed in an experiment to assess their effects on dependent variables.