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Break-even EBIT (with taxes). Beta, Gamma, and Delta Companies are similar in every way except for their capital structures. Beta is an all-equity firm with
Break-even EBIT (with taxes). Beta, Gamma, and Delta Companies are similar in every way except for their capital structures. Beta is an all-equity firm with $5,400,000 of value and 150,000 shares outstanding. Gamma is a levered firm with the same value as Beta, but $1,620,000 in debt at 6% and 105,000 shares outstanding. Delta is a levered firm with the same value as both Beta and Gamma with $3,240,000 in debt at 15% and 60,000 shares outstanding. What are the break-even EBITs for Beta and Gamma, Beta and Delta, and Gamma and Delta Companies if the corporate tax rate is 35% for all three companies? What is the break-even EBIT for Beta and Gamma companies? (Round to the nearest dollar.)
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