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Bond Value is $50 2. Robert Financing has two competing financing alternatives The Company Corp. A. B. Issue $ 5 million in common stock at
Bond Value is $50
2. Robert Financing has two competing financing alternatives The Company Corp. A. B. Issue $ 5 million in common stock at $ 50 per share Issuing a straight bond at par value for the same amount as in B with a coupon rate of 10% The Company's marginal tax rate is 30% The Company currently has 10 million shares of common stock outstanding C. D. Required: a. Which of the two financing options is better? Support your recommendation with numbers b. At what EBIT* level Robert should be indifferent between the two alternatives? (Hint: level of EBIT* is equal of level of equilibrium of the two alternatives)Step by Step Solution
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