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Billy's is currently an all equity firm that has 150000 shares of stock outstanding at a market price of $39.36 a share. The firm has
Billy's is currently an all equity firm that has 150000 shares of stock outstanding at a market price of $39.36 a share. The firm has decided to leverage its operations by issuing $100000 of debt at an interest rate of 4.5 percent. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. What is the minimum level of earnings before interest and taxes that must be achieved in order for this to occur (that is, what is the breakeven EBIT?) Ignore taxes.
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