A company wishes to raise additionaldebtfinance and isassessingthe impact thiswill have on key ratios.
The following data currently applies:
* Profit before interest and tax for the current yearis $500,000
* Long term debt of $300,000 at a fixed interest rate of 5%
* 250,000 sharesin issuewith a share price of $8
The companyplansto borrow an additional $200,000 on the first day of the yearto invest in new project whichwillimprove annualprofit before interest and tax by $24,000.
The additionaldebtwould carry an interest rate of 3%.
Assume the number of shares in issue remain constant but theshare price will increase to $8.50 after the investment.
Therate of corporate income tax is 30%.
After the investment, which of the following statements is correct?
Kimbery
11 months agoKenny
11 months agoJohnetta
11 months agoElfriede
11 months agoFannie
12 months agoAracelis
12 months agoPete
12 months agoLanie
12 months ago