Question
Ernst Electrical has 9,000 shares of stock outstanding and no debt. The new CFO is considering issuing $80,000 of debt and using the proceeds to
Ernst Electrical has 9,000 shares of stock outstanding and no debt. The new CFO is considering issuing $80,000 of debt and using the proceeds to retire 1,500 shares of stock. The coupon rate on the debt is 7.5 percent. What is the break-even level of earnings before interest and taxes between these two capital structure options?
A. $18,500
B. $21,000
C. $24,000
D. $32,500
E. $36,000
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The Oxford Guide To Financial Modeling
Authors: Thomas S Y Ho, Sang Bin Lee
1st Edition
019516962X, 9780195169621
