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  • Apr 28, 2013, 08:48 PM
    Cindy78
    abe forrester and three of his friends
    Hi,
    I am having trouble with the algebra part of the EBIT-EPS Analysis. I am not sure how my text is coming up with the answer. I can't get past this part what is my next step?

    (EBIT-0)* (1-.36)/86,000 = (EBIT - 150,000) * (1-.36)/43,000

    I understand that the EBIT= 300,000 but I cannot get the algebra correct to get that answer. This is a practice problem and I just want to get the math down so I can apply it correctly in the future.
    Here is the plan
    Plan A. the company will raise 2.4 million by selling 86,000 shares C.S
    Plan B Raise the money by selling 1.2 million in long term bonds at 12.5% interest plus 1.2 million raised in selling 43,000 shares of C.S. No maturing rate on debt fund and a corporate tax rate of 36%

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