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Kelso Electric is an all-equity firm with 56,000 shares of stock outstanding. The company is considering the issue of $380,000 in debt at an interest
Kelso Electric is an all-equity firm with 56,000 shares of stock outstanding. The company is considering the issue of $380,000 in debt at an interest rate of 6 percent and using the proceeds to repurchase stock. Under the new capital structure, there would be 35,000 shares of stock outstanding. Ignore taxes. What is the break-even EBIT between the two plans?
Multiple Choice $38,000 $65,867 $52,114 $60,800 $42,750
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