Question

Data Number of shares 500 Price per share $ 10 Market value of shares $ 5,000 Market value of debt $ 5,000 Interest at 10% $ 500 Although It expects to have an income of $1,500 a year in perpetuity, this Income is not certain. This table shows the return to stockholders under different assumptions about operating Income. We assume no taxes. Outcomes Operating income ($) 500 1,000 1,500 2,000 Interest ($) 500 500 500 500 Equity earnings ($) 0 500 1,000 1,500 Earnings per share ($) 0 1.00 2.00 3.00 Return on shares (%) 0 10 20 30 Expected outcome Suppose that Macbeth Spot Removers Issues only $4,000 of debt and uses the proceeds to repurchase 400 shares. The Interest rate on the debt is 10%. a. Calculate the equity earnings, earnings per share, and return on shares for each operating Income assumption. b. If the beta of Macbeth's assets is 0.80 and its debt is risk-free, what would be the beta of the equity after the debt Issue? ☑ Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption. Note: Input all values as a positive number. Round your "Earnings per share" answers to 2 decimal places. Enter your "Return on shares" answers as a percent rounded to 2 decimal places. Round the other answers to the nearest whole number. Outcomes Operating income ($) 500 1,000 1,500 2,000 Interest 400 400 400 400 Equity earnings ($) 100 600 1,100 1,600 Earnings per share ($) Return on shares (%)

          Data
Number of shares 500
Price per share $ 10
Market value of shares $ 5,000
Market value of debt $ 5,000
Interest at 10% $ 500
Although It expects to have an income of $1,500 a year in perpetuity, this Income is not certain. This table shows the return to
stockholders under different assumptions about operating Income. We assume no taxes.
Outcomes
Operating income ($) 500 1,000 1,500 2,000
Interest ($) 500 500 500 500
Equity earnings ($) 0 500 1,000 1,500
Earnings per share ($) 0 1.00 2.00 3.00
Return on shares (%) 0 10 20 30
Expected
outcome
Suppose that Macbeth Spot Removers Issues only $4,000 of debt and uses the proceeds to repurchase 400 shares. The Interest rate
on the debt is 10%.
a. Calculate the equity earnings, earnings per share, and return on shares for each operating Income assumption.
b. If the beta of Macbeth's assets is 0.80 and its debt is risk-free, what would be the beta of the equity after the debt Issue?
☑ Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required A Required B
Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption.
Note: Input all values as a positive number. Round your "Earnings per share" answers to 2 decimal places. Enter your "Return
on shares" answers as a percent rounded to 2 decimal places. Round the other answers to the nearest whole number.
Outcomes
Operating income ($) 500 1,000 1,500 2,000
Interest 400 400 400 400
Equity earnings ($) 100 600 1,100 1,600
Earnings per share ($)
Return on shares (%)

data number of shares 500 price per share 10 market value of shares 5000 market value of debt 5000 interest at 10 500 although it expects to have an income of 1500 a year in perpetuity this 49048

Added by Kevin D.

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