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The Grist Mill Has No Debt

question 28

Multiple Choice

The Grist Mill has no debt.The firm has a total market value of $245,000 with 10,000 shares of stock outstanding.The firm has expected EBIT of $14,000 if the economy is normal and $17,000 if the economy booms.The firm is considering a bond issue of $49,000 with an attached interest rate of 8 percent.The bond proceeds will be used to repurchase shares.The tax rate is 34 percent.Compute the EPS after the repurchase for both a normal and a boom economy.What is the percentage increase in EPS if the economy booms rather than being normal?

Learn about the role and structure of the chart of accounts.

Understand basic accounting concepts such as debits, credits, and the normal balance of various types of accounts.

Be able to prepare and understand the purpose of a trial balance.

Identify and correct common types of accounting errors that affect the trial balance.

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