A Firm Has a Current Capital Structure Consisting of $400,000

question 155

Multiple Choice

A firm has a current capital structure consisting of $400,000 of 12 percent annual interest debt and 50,000 shares of common stock. The firm's tax rate is 40 percent on ordinary income. If the EBIT is expected to be $200,000, the firm's earnings per share will be ________.

• A) $2.40
• B) $3.04
• C) $7.04
• D) $1.82

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Definitions:

Employee Involvement

This concept refers to strategies and practices that allow employees to contribute ideas, suggestions, and feedback concerning business operations, which can lead to improved performance and job satisfaction.

Modified Contingency

A concept in management where strategies are adjusted based on the situational variables and contexts involved.

Closed Systems

Refers to systems that are not influenced by or do not interact with their environment.

Contingency

A future event or circumstance that is possible but cannot be predicted with certainty.