Ski and Board are two identical firms of identical size operating in identical m

Question

Ski and Board are two identical firms of identical size operating in identical markets. Ski is unlevered with assets valued at $15000 and has 750 shares of stock outstanding. Board also has $15000 in assets and has $6000 in debt financed at an interest rate of 6.00% and has 450 shares of stock outstanding. Assume perfect capital markets.

Calculate the level of EBIT that would make earnings per share the same for Ski and Board. $ ________

Place your answer to the nearest dollar. If applicable, your answer should NOT include a comma

Explanation / Answer

EBIT= 900 Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Ski Board Let EBIT be x x Interest = 6000*6%                     360.00 EBT or earnings availeble for equity shareholder x x - 360 No of shares                750.00                     450.00 Earning per share x/750 (x-360)/450 Since EPS is same x/750 = x/450 - 360/450 x/750 = x/450-.80 (3x - 5x)/2250 = -.80 3x- 5x = -1800 2x = 1800 x = 900

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