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blankship blankship
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A firm's capital structure is made up of 200,000 common shares and $1,000,000 debt at 12% interest. The company's tax rate is 50%. An additional $500,000 has to be raised, and the following financing alternatives are available:
Option 1:Common shares: The company can sell additional shares at $10 a share.
Hence, 50,000 new shares would have to be issued.
Option 2:Debt: Debt can be issued at 12%, requiring interest payments of $60,000.
Compute EPS as a function of EBIT for both alternatives and derive the break-even point.
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
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frithnefrithne
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