A firm has a projected EBIT of $20,000 for a new project. The funds needed for the
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A firm has a projected EBIT of $20,000 for a new project. The funds needed for the project are $40,000. The firm can finance the project completely with debt at a pre-tax interst cost of 10%. Alternatively, the firm could finance the project with ewuity by selling stock at $5 per share. If there are 500,000 shares outstanding and the firm's tax rate is 40%, what is the EBIT-EPS indifference point?
-$504,000
-$500,000
-$254,000
-$20,000
-$40,000
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