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A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios.
The following data currently applies:
* Profit before interest and tax for the current year is $500,000
* Long term debt of $300,000 at a fixed interest rate of 5%
* 250,000 shares in issue with a share price of $8
The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000.
The additional debt would carry an interest rate of 3%.
Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment.
The rate of corporate income tax is 30%.
After the investment, which of the following statements is correct?
A. Interest cover will fall; P/E ratio will rise.
B. Interest cover will rise; P/E ratio will rise.
C. Interest cover will rise; P/E ratio will fall.
D. Interest cover will fall; P/E ratio will fall.
Answer: A
NEW QUESTION: 2
Drag and drop the source from the left to the numbers on the right.
Beginning with the lowest and ending with highest administrative distance.
Answer:
Explanation:
NEW QUESTION: 3
部分的な支払いを送信すると、どのような結果になりますか？この質問には2つの正解があります。
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B. 最初の請求書は開いたままです。
C. 最初の請求書が決済されます。
D. 請求書に支払いブロックが設定されています。
Answer: A,B
NEW QUESTION: 4
DHCPV6 clients must obtain both IPv6 addresses and other configurations from the DHCPv6 server.
A. FALSE
B. TRUE
Answer: A
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