The CFO of Metal Recycling Inc. has come up with the following projected figures for next year:
Sales 275,000
Costs 70% of sales
Depreciation 30,000
Tax rate 35%
Current Shares outstanding 11,000
Metal Recycling Inc has no debt currently, but the board is considering a loan of $300,000 at 11% interest, which they will use to repurchase shares of their own stock at $100 per share. The CFO thinks his projections of sales may be off by + or - 10%. Depreciation will stay the same. What will their EPS be under the current structure and under the proposed structure for each scenario? Is the restructuring a good idea?
Current Structure:
Worst Case ____________ Base Case_______________ Best Case _____________
Proposed Structure:
Worst Case ____________ Base Case_______________ Best Case _____________
Should they do the restructuring? __________________
Yes or no