Question
California food processors is currently involved in a restructuring program that involves increasing its existing debt from $5 million to $25 million. The interest rate
California food processors is currently involved in a restructuring program that involves increasing its existing debt from $5 million to $25 million. The interest rate on debt is 12% and it is not expected to change. The company has currently one million shares outstanding and the price per share is $40. If the restructuring is expected to increase the Return on Equity (ROE), what is the minimum level of EBIT that California food processors should be expecting?
Ignore taxes. (5 Marks)
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Entrepreneurial Finance
Authors: J. Chris Leach, Ronald W. Melicher
6th edition
1305968352, 978-1337635653, 978-1305968356
