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blankship blankship
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4 months ago
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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4 months ago
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blankship Author
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4 months ago
Thanks
carston
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Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
mcraver1
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2 hours ago
Just got PERFECT on my quiz
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