1. For 2007 and 2008 Estimated INCOME STATMENT:(The balance sheet has been done for you already)·...

Question

1. For 2007 and 2008 Estimated INCOME STATMENT:
(The balance sheet has been done for you already)
· Calculate EPS for each scenario ($50 million Debt, Prefe
ed Stock OR Equity)
· Each scenario raises approximately $50 million. The company plans to reinvest in the business, so there will be no interest income and no change in operating income (EBIT).
· Remember that prefe
ed dividends are paid after net income (not tax deductible) but that EPS is calculated on net income available to common shareholders (which is after prefe
ed dividends are paid).
· Calculate EBIT/Interest for all three scenarios.

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Khushboo · Accepted Answer

Debt
	Granite Apparel (Create Pro Formas for 2007 and 2008 for Debt scenario)
	 
	 							Pro Forma	Pro Forma
	 	2006	 	2007E		2008E		2007E	2008E
	REVENUE	193		289.5		405.3		289.5	405.3
	COGS	-98.4		-144.7		-202.6		-144.7	-202.6
	   GP	94.6		144.8		202.7		144.8	202.7
	S,G&A	-67.5		-110		-150		-110	-150
	EBITDA	27.1	 	34.8	 	52.7	 	34.8	52.7
	Depreciation	-5.2		-11.7		-18.3		-11.7	-18.3
	EBIT	21.9	 	23.1	 	34.4	 	23.1	34.4	 
	Interest	0.5		0.4		0.4		0.4	0.4
	New Interest (*)	0		0		0		3.3	3.0	Shares 	200,000
	PreTax	21.4		22.7		34		19.4	31.0	Interest 	6.56%
	Tax	6.42	 	6.81		10.2		5.8	9.3	year 
	Net Income	14.98	 	15.89	 	23.8	 	13.6	21.7
					 				 
	Preferred Dividends	0		0		0		0.0	0.0
								 	 
	Income Available to Common	14.98		15.89	 	23.8		13.6	21.7
					 			 	 
	SHARES OUTSTANDING	20	 	20	 	20		20.00	20.00	 
	New Shares Issued (if applicable)	0	 	0	 	0		0.20	0.20	 
	Total Shares Outstanding	20	 	20	 	20		20.20	20.20
			 		 			 	 
	EPS	$   0.75	 	$   0.79	 	$   1.19		$   0.67	$   1.08
	EBIT/Interest							$   6.28	$   10.26
	 
			 
	(*) For pro formas,

1. For 2007 and 2008 Estimated INCOME STATMENT: (The balance sheet has been done for you already) · Calculate EPS for each scenario ($50 million Debt, Preferred Stock OR Equity) · Each scenario raises...

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