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(Capl. Str.) A company has 6.24 million common shares outstanding and $73 million of debt with an interest rate of 5.4%. The company wants to
(Capl. Str.) A company has 6.24 million common shares outstanding and $73 million of debt with an interest rate of 5.4%. The company wants to raise another $58.4 million. It can do so by selling an additional 3.12 million shares of common stock (the equity plan) or by taking out a bank loan with an interest rate of 6.7% (the debt plan). The company has no preferred stock. The corporate tax rate is 24%. At what level of EBIT would the company have the same earnings per share (EPS) under either plan?
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