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    Continental Carriers

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    Vishwas Nandan
    This document contains financial information for two capital structure plans (stock plan and bond plan) of Continental Carriers. It provides key metrics such as EBIT, interest, taxes, earnings per share, return on equity, and break-even points both with and without considering sinking fund deductions. The bottom section introduces a preference share plan and calculates its earnings available for equity shareholders and return on equity. Overall, the document compares the financial implications of different capital structure options for Continental Carriers.

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    © All Rights Reserved
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    Continental Carriers

    Uploaded by

    Vishwas Nandan
    900 views6 pages
    This document contains financial information for two capital structure plans (stock plan and bond plan) of Continental Carriers. It provides key metrics such as EBIT, interest, taxes, earnings per share, return on equity, and break-even points both with and without considering sinking fund deductions. The bottom section introduces a preference share plan and calculates its earnings available for equity shareholders and return on equity. Overall, the document compares the financial implications of different capital structure options for Continental Carriers.

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    This document contains financial information for two capital structure plans (stock plan and bond plan) of Continental Carriers. It provides key metrics such as EBIT, interest, taxes, earnings per share, return on equity, and break-even points both with and without considering sinking fund deductions. The bottom section introduces a preference share plan and calculates its earnings available for equity shareholders and return on equity. Overall, the document compares the financial implications of different capital structure options for Continental Carriers.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    900 views6 pages

    Continental Carriers

    Uploaded by

    Vishwas Nandan
    This document contains financial information for two capital structure plans (stock plan and bond plan) of Continental Carriers. It provides key metrics such as EBIT, interest, taxes, earnings per share, return on equity, and break-even points both with and without considering sinking fund deductions. The bottom section introduces a preference share plan and calculates its earnings available for equity shareholders and return on equity. Overall, the document compares the financial implications of different capital structure options for Continental Carriers.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    Group-2, (Dimple Yadav pgp30310, Kanika Aneja pgp30312, Khu

    Not considering sinking fund deduction


    Figures in $ '000
    EBIT
    Less: Interest @10% of $ 50 M
    EBT
    Less: Taxes @ 40%
    EAT
    No. of Equity Shares
    EPS
    Mkt value of equity
    Book value of equity
    ROE (Mkt value of equity)
    ROE (Book value of equity)

    Stock Plan
    Bond Plan
    34,000
    34,000
    0
    5,000
    34,000
    29,000
    13,600
    11,600
    20,400
    17,400
    7,500
    4,500
    2.72
    3.87
    125,625
    75,375
    336,833
    202,100
    16.2%
    23.1%
    6.1%
    8.6%

    Considering sinking fund deduction


    Figures in $ '000
    EBIT
    Less: Interest @10% of $ 50 M
    EBT
    Less: Taxes @ 40%
    Less : Sinking Fund
    EAT
    No. of Equity Shares
    EPS
    Mkt value of equity
    Book value of equity
    ROE (Mkt value of equity)
    ROE (Book value of equity)

    Stock Plan
    Bond Plan
    34,000
    34,000
    0
    5,000
    34,000
    29,000
    13,600
    11,600
    2,500
    20,400
    14,900
    7,500
    4,500
    2.72
    3.31
    125,625
    75,375
    336,833
    202,100
    16.2%
    19.8%
    6.1%
    7.4%

    cost of debt (interest + sinking fund)


    Total cost in %
    Preference shares
    Figures in $ '000
    EBIT
    Less: Interest
    EBT
    Less: Taxes
    EAT
    Less: Preference Dividend

    9,167
    18.3%

    34,000
    0
    34,000
    13,600
    20,400
    5,250 $10.5/ share and 500,00

    Earnings available for equity shareholders


    No. of Equity Shares
    EPS
    Mkt value of equity
    Book value of equity
    ROE (Mkt value of equity)
    ROE (Book value of equity)

    Book Value
    EBIT
    Less: Interest
    EBT
    Less: Taxes @ 40%
    EAT
    No. of Equity Shares
    EPS
    Book value of equity @ $45/share
    ROE

    15,150
    4,500
    3.37
    75,375
    202,100
    20.1%
    7.5%

    34,000
    34,000
    13,600
    20,400
    5,611
    3.64
    252,001
    8.1%

    Continental Carriers

    neja pgp30312, Khushbu Bhartiya pgp30315, Nidhi Verma pgp30322, Vishwas R pgp30353)

    Market value per share


    Book value per share

    16.75
    44.91 Stockholder's equity (in Balance sheet)/No.o

    Breakeven point
    EPS
    1
    EBIT
    12,500
    Equity financed
    Debt financed
    Equating EPS to find break-even point
    EBIT(1-T) / 7500
    =
    {(EBIT - Int )*(1-t)}/4500
    Leverage is favourable from EBIT $12.5 million onwards

    Breakeven point
    EPS
    1.83
    EBIT
    22,916
    Equity financed
    Debt financed
    Equating EPS to find break-even point
    EBIT(1-T) / 7500
    =
    [{(EBIT - Int )*(1-t)} - Sinking Fund]/4500

    Leverage is favourable from EBIT $22.9 million onwards. Below $22.9 m EBIT , EPS highe

    0.5/ share and 500,000 shares

    pgp30322, Vishwas R pgp30353)

    tockholder's equity (in Balance sheet)/No.of shares outstanding

    )*(1-t)}/4500

    on onwards

    )*(1-t)} - Sinking Fund]/4500

    on onwards. Below $22.9 m EBIT , EPS higher for equity finance (stock) plan .

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