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Persnickety Pens has been operating as an all-equity company for the last 50 years and currently has 100,000 shares outs
Posted: Sun Jul 03, 2022 12:56 pm
by answerhappygod
- Persnickety Pens Has Been Operating As An All Equity Company For The Last 50 Years And Currently Has 100 000 Shares Outs 1 (39.75 KiB) Viewed 14 times
Persnickety Pens has been operating as an all-equity
company for the last 50 years and currently has 100,000 shares outstanding and total assets of $900,000. The
company is considering a change to its capital structure by selling debt to retire 30,000 shares. The cost of debt is 6%. What is the EBIT that the
company must earn to be indifferent between the equity and debt structures? At EBIT = $54,000, the
company is indifferent between the capital structure options. Above the breakeven point, the
company would prefer the debt option. All answers are correct. At the breakeven point, the EPS is $0.38 per share for the equity option.