Winfield Refuse Management, Inc.: Raising Debt vs. Equity Case 1) Look at the
Winfield Refuse Management, Inc.:
Raising Debt vs. Equity Case
Look at the
sheet labeled EBIT-EPS focusing on the calculations in columns A to E and let
me know what you observe there (there are many things to be observed, just
mention a few). Column B contains the calculation of EPS if WRM does not
acquire APIS. Columns C, D and E contain the calculation of EPS if WRM acquires
APIS and the money for the acquisition is obtained from “Nothing”
(meaning for free, as a gift), from “Bonds” or from “Equity”.
The alternatives “Nothing” do not exist in real life, of course, they
are there only for pedagogical purposes. Enough hints.
2) The numbers in
columns G to K of the EBIT-EPS sheet allow you to get the EBIT-EPS Chart that
appears in the next sheet. Can you explain why do we need this EBIT-EPS Chart?
What does the chart convey in this case for WRM?