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    Nina9669's Avatar
    Nina9669 Posts: 2, Reputation: 1
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    #1

    Jul 7, 2012, 05:18 PM
    Abe Forrester and three of his friends from college have interested a group of ventur
    Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonio. To finance the new venture two plans have been proposed. Plan A is an all-common-equity structure in which 2.3 million dollars would be raised by selling 84,000 shares of common stock. Plan B would involve issuing 1.1 million dollars in long term bonds with an effective interest rate of 11.7% plus a 1.2 million would be raised by selling 42,000 shares of common stock. The debt funds raised under plan B have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firms capital structure. Abe and his partners plan to use a 40% tax rate in their analysis, and they have hired you on a consulting basis to do the following: A. Find the EBIT indifference level associated with the two financing plans. B. Prepare a pro forma income statement for the EBIT level solved for in Part a. that shows that EPS will be the same regardless whether Plan A or Plan B is chosen
    JudyKayTee's Avatar
    JudyKayTee Posts: 46,505, Reputation: 4600
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    #2

    Jul 7, 2012, 05:21 PM
    AMHD has a clear policy concerning not doing homework - which you read when you signed up.

    I don't think Abe Forrester and his 3 friends are your friends so I'm concluding this IS homework.

    But thanks for copying it in its entirety.
    Nina9669's Avatar
    Nina9669 Posts: 2, Reputation: 1
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    #3

    Jul 7, 2012, 05:54 PM
    Actually I did not copy the entire note... my question was the formula for EBIT in which I cut out from bottom... I did not copy the entire text properly. Thanks for assuming I'm trying to get the entire answer you should have asked if there was a particular question about the problem. So, rude and unprofessional get a life.
    JudyKayTee's Avatar
    JudyKayTee Posts: 46,505, Reputation: 4600
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    #4

    Jul 8, 2012, 04:38 AM
    Quote Originally Posted by Nina9669 View Post
    Actually I did not copy the entire note...my question was the formula for EBIT in which I cut out from bottom...I did not copy the entire text properly. Thanks for assuming I'm trying to get the entire answer you should have asked if there was a particular question about the problem. So, rude and unprofessional get a life.

    Why would it matter? We don't do homework.
    ScottGem's Avatar
    ScottGem Posts: 64,970, Reputation: 6056
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    #5

    Jul 8, 2012, 06:26 AM
    Thank you for asking our help with your homework assignment. However, there are some rules we have for doing so.
    Do not simply retype or paste a question from your book or study material

    We won't do your homework questions for you. You were given the assignment for you to learn.

    If you come up with your own answer or process and post it for us to critique that is acceptable. If you have some SPECIFIC questions that you couldn't find or didn't understand, we may help with that.
    But this is your assignment, so show us you have at least attempted to complete it on your own.

    Thank you.

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