4 TUCC - UCC ONLINE FAQS - UCC LIBRARY ADDITIONAL RESOUR XYZ Company requires $1,000,000 for...
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4 TUCC - UCC ONLINE FAQS - UCC LIBRARY ADDITIONAL RESOUR XYZ Company requires $1,000,000 for its proposed plan. The following financial alternatives are available: Plan I: 100% Equity Capital (Face Value $100) Plan II: 50% Equity Capital (Face Value $100) and 50% Debenture (interest rate 6%) Plan III: 50% Equity Capital (Face Value $100) and 50% Preference Shares (rate of dividend 6%) Plan IV: 25% Equity Capital (Face Value $100), 25% Debentures (interest rate 6%), and 50% Preference Shares (rate of dividend 6%) The rate of tax applicable to the company is 50%. The company expects an EBIT of $4,000,000. Calculate the Indifference point of EBIT between plans I and II O a. $60,000 O b. $120,000 C. $100,000 O d. $90,000 Clear my choice 4 TUCC - UCC ONLINE FAQS - UCC LIBRARY ADDITIONAL RESOUR XYZ Company requires $1,000,000 for its proposed plan. The following financial alternatives are available: Plan I: 100% Equity Capital (Face Value $100) Plan II: 50% Equity Capital (Face Value $100) and 50% Debenture (interest rate 6%) Plan III: 50% Equity Capital (Face Value $100) and 50% Preference Shares (rate of dividend 6%) Plan IV: 25% Equity Capital (Face Value $100), 25% Debentures (interest rate 6%), and 50% Preference Shares (rate of dividend 6%) The rate of tax applicable to the company is 50%. The company expects an EBIT of $4,000,000. Calculate the Indifference point of EBIT between plans I and II O a. $60,000 O b. $120,000 C. $100,000 O d. $90,000 Clear my choice
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