Finance : Electronics For All (EFA) is a firm with assets valued at $10,000

Finance : Electronics For All (EFA) is a firm with assets valued at $10,000

Subject: Business / Finance
Question

1. ElectronicsForAll (EFA) is a firm with assets valued at $10,000 and with 400 shares of stock outstanding. EFA has a capital structure that contains $2,500 in debt financed at 10% interest. Which of the following comes closest to EFA’s leverage factor?

a.1.000

b.1.250

c.1.333

d.1.667

e.4.000

2.Ninety Nine Inc. is a firm with a stock price of $50 per share. The firm does not pay a dividend. Jack is a shareholder with 100 shares of the firm that he purchased two years ago for $35 per share. Jack needs cash and has decided to create for himself a $100 dividend by selling some of his Ninety Nine shares. Which of the following comes closest to the total amount that Jack gets to keep from the sale of Ninety Nine shares assuming that Jack’s tax rate on capital gains is 20%?

a.$100

b.$98

c.$96

d.$94

e.$92

3.Kale, Inc is a levered firm and total assets of $300,000. Kale’s equity is $50,000, and the firm has issued debt with a coupon rate of 5%. Kale has 5,000 shares of stock outstanding, and earnings per share (EPS) of $0.50. If Kale pays tax at the rate of 25%, which of the following comes closest to Kale’s earnings before interest and tax (EBIT)?

a.$2,226

b.$5,508

c.$8,753

d.$11,083

e.$15,833