# summary

What is the final consensus on the following Q’s? 1)was it negative or positive correlation .461? 2) was consolidated goodwill 8950? 3) contango or normal contango? 4)Senior bond is NOT senior to bank debt? 5)EPS of 2.41? Cheers.

1. negative 2) I said 8950, but it was 7550 3) don’t go there. 4) Correct. 5) I said 2.50, but I was lazy in calculating. consensus says 2.41

what is the eps question? is that the one with earnings yield and after tax cost of debt? if so i think choice C) was 2.48, not 2.50. Choice C is what I put. Can someone confirm the 2.48?

EPS calculation (assuming that I got the cost of debt right here): \$12,000,000 (NI) - 450,000 (aftertax cost of debt) / 5,000,000 (original shares) - 200,000 (shares repurchased) = 2.406

the initial eps was 2.40. the eps only went up six thousandth of a point?

Yes EPS went up slightly. I actually go and check this: earning yield (E/P)> cost of debt, therefore EPS definitely go up.

EPS was 2.41. Correct

Kwekoolio Wrote: ------------------------------------------------------- > EPS calculation (assuming that I got the cost of > debt right here): > > \$12,000,000 (NI) - 450,000 (aftertax cost of debt) > / 5,000,000 (original shares) - 200,000 (shares > repurchased) = 2.406 Exactly what I did. I believe after-tax cost of debt was given, so there was no extra calculation involved using a tax rate based on my memory.

The question clearly asked what the impact of eps would be if option #1 was selected. Option #1 was repurchase stock with cash on hand. I do not know where people are getting the fact that they used debt to repurchase stock, unless we have different exams. Others definitely saw the question from my perspective as well.

mib20 Wrote: ------------------------------------------------------- > The question clearly asked what the impact of eps > would be if option #1 was selected. Option #1 was > repurchase stock with cash on hand. I do not know > where people are getting the fact that they used > debt to repurchase stock, unless we have different > exams. Others definitely saw the question from my > perspective as well. Must’ve been a different exam. The last question in this vignette ( took mine in NYC - not sure what form it is - 5050?) was what happens to EPS when you borrow the funds to repurchase the debt IF YOU WERE TO BORROW. I think the scenario was that a manager wanted to know the effect on EPS if he were to borrow the funds for option 1 instead of using cash on hand.