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CHAPTER 8 • IMPLEMENTING STRATEGIES: MARKETING, FINANCE/ACCOUNTING, R&D, AND MIS ISSUES  265

              TABLE 8-7   EPS/EBIT Analysis for Boeing (M = In Millions)
               Amount Needed: $10,000 M
               Interest Rate: 5%
               Tax Rate: 7%
               Stock Price: $53.00
               # of Shares Outstanding: 826 M

                                    Common Stock Financing                           Debt Financing
                             Recession       Normal         Boom         Recession       Normal          Boom
               EBIT           1,000.00       2,500.00      5,000.00       1,000.00       2,500.00       5,000.00
               Interest          0.00           0.00          0.00         500.00         500.00         500.00
               EBT            1,000.00       2,500.00      5,000.00        500.00        2,000.00       4,500.00
               Taxes            70.00         175.00        350.00          35.00         140.00         315.00
               EAT             930.00        2,325.00      4,650.00        465.00        1,860.00       4,185.00
               # Shares       1,014.68       1,014.68      1,014.68        826.00         826.00         826.00
               EPS               0.92           2.29          4.58           0.56           2.25           5.07
                                      70% Stock—30% Debt                          70% Debt—30% Stock
                             Recession       Normal         Boom         Recession       Normal          Boom
               EBIT           1,000.00       2,500.00      5,000.00       1,000.00       2,500.00       5,000.00
               Interest        150.00         150.00        150.00         350.00         350.00         350.00
               EBT             850.00        2,350.00      4,850.00        650.00        2,150.00       4,650.00
               Taxes            59.50         164.50        339.50          45.50         150.50         325.50
               EAT             790.50        2,185.50      4,510.50        604.50        1,999.50       4,324.50
               # Shares        958.08         958.08        958.08         882.60         882.60         882.60
               EPS               0.83           2.28          4.71           0.68           2.27           4.90





                       6.0
                       5.5                                                                      Debt
                       5.0                                                                      70% Debt
                       4.5                                                                      70% Stock
                       4.0                                                                      Common Stock
                       3.5
                  EPS  3.0
                       2.5
                       2.0
                       1.5
                       1.0
                       0.5
                       0.0
                         1,000                             2,500                            5,000
                                                           EBIT








              Conclusion: Boeing should use common stock to raise capital in recession (see 0.92) or normal (see 2.29) economic conditions but should use debt
              financing under boom conditions (see 5.07). Note that a dividends row is absent from this analysis. The more shares outstanding, the more dividends
              to be paid (if the firm pays dividends), which would lower the common stock EPS values.
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