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Neptune Corporation has a present capital structure consisting of common stock (10 million shares) and debt ($150 million, 8% coupon rate). The company needs to
Neptune Corporation has a present capital structure consisting of common stock (10 million shares) and debt ($150 million, 8% coupon rate). The company needs to raise $54 million and is undecided between two financing plans. Plan A: Equity financing. Under this plan, additional common stock will be sold at $27 per share. Plan B: Debt financing. Under this plan, the firm will issue 9% coupon bonds. At what level of operating income (EBIT) will the firm be indifferent between the two plans? Assume a 21% marginal tax rate. O $30.6 million $32.4 million O $54 million O $31.8 million $41.2 million
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