Question

Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 275,000 shares outstanding, and its debt/total invested capital ratio was 44%. The firm finances using only debt and common equity, and its total assets equal total invested capital. How much debt was outstanding

Answer 1

$4,915,625

Step-by-step explanation:

EPS = $2.75

Book Value Per Share = $22.75

Shares Outstanding = 275,000

Debt Ratio = 44%

Total Equity = Shares Outstanding * Book Value Per Share

Total Equity = 275,000 * $22.75

Total Equity = $6,256,250

Total Assets = {Total Equity} / {1-Debt Ratio}

Total Assets = $6,256,250 / (1 - 44%)

Total Assets = $6,256,250 / 0.56

Total Assets = $11,171,875

Total Debt = Total Assets - Equity

Total Debt = $11,171,875 - $6,256,250

Total Debt = $4,915,625

Therefore, the Total Debt Outstanding is $4,915,625