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Aspen Company is financed with $ 5 0 million of 8 % debt and $ 7 5 million of common equity. The firm has 1
Aspen Company is financed with $ million of debt and $ million of common equity. The firm has million shares of common stock outstanding. Aspen needs to raise $ million and is undecided between two possible plans for raising this capital: Plan A: Equity Financing. Under this plan, common stock will be sold at $ per share. Plan B: Levered Financing. Under this plan, half of the capital will be raised with equity at $ per share and half will be raised by selling coupon bonds. At what level of operating income EBIT will the firm be indifferent between the two plans? Assume a marginal tax rate. A $ million B $ million C $ million D $ million E $ million
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