Galaxy Products is comparing two different capital structures, an all-equity plan (Plan
I) and a levered plan (Plan II). Under Plan I, Galaxy would have 178,500 shares of
stock outstanding. Under Plan II, there would be 71,400 shares of stock outstanding and
$1.79 million in debt outstanding. The interest rate on the debt is 10 percent and there
are no taxes. What is the breakeven EBIT?
Dixie Supply has total assets with a current book value of $368,900 and a current
replacement cost of $486,200. The market value of these assets is $464,800. What is the
value of Tobin's Q?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
A. permits creditors to file a prepack immediately after a firm files for bankruptcy
B. prevents creditors from submitting any reorganization plans.
C. prevents firms from filing for bankruptcy protection more than once.
D. permits key employee retention plans only if an employee has another job offer.
E. allows firms to pay bonuses to all key employees to entice those employees to
remain in the firm's employ.