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Air Monica has decided to purchase two new airplanes to allow it to expand its charter service. In order to finance this $800,000 expenditure, the
Air Monica has decided to purchase two new airplanes to allow it to expand its charter service. In order to finance this $800,000 expenditure, the company is considering three financing plans: Plan A Issue common stock at $40 per share. This plan will increase the number of outstanding shares of common stock to 120,000 shares. Plan B Issue 12 percent preferred stock only. Plan C Issue 12 percent coupon rate bonds only. 2 The firm presently has no preferred stock but has interest expenses of $44,000 per year; its tax rate is 35 percent. What is the crossover or indifferent EBIT (EBIT*) between plans A & B, Plans A & C, and Plans B & C
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