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    Khandker Motors Finances

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    Khandker Motors finances 40% of its total capital with debt. The cost of debt is 11%. The firm is in the 37% tax bracket and earned an operating profit of $2.5 million dollars. If the Khandker's total capital amounts to $22 million and its book value per share is $20, what is the firm's earnings per share?

    a.
    $0.85
    b.
    $0.88
    c.
    $1.43
    d.
    $1.46

    © BrainMass Inc. brainmass.com March 4, 2021, 7:41 pm ad1c9bdddf
    https://brainmass.com/business/the-time-value-of-money/khandker-motors-finances-116196

    Solution Preview

    Total capital = 22 million
    Equity capital = (1-40%)*22 million = 13.2 million
    Debt capital = 0.4*22=8.8 ...

    Solution Summary

    The solution calculates Khandker Motors' earnings per share.

    $2.49

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