Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the companys

Question:

Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company’s profits are driven by the amount of work Tom does. If he works 40 hours each week, the company’s EBIT will be $455, 000 p e r y e a r; i f h e w o r k s a 50 - h o u r w e e k, t h e c o m p a n y^{'} s E B I T w i l l b e$ 560,000 per year. The company is currently worth $2.9 m i l l i o n . T h e c o m p a n y n e e d s a c a s h i n f u s i o n o f$ 1.2 million and can issue equity or issue debt with an interest rate of 8 percent. Assume there are no corporate taxes.