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Orange and Lepp are two identical firms operating in identical markets. Orange is unlevered with assets valued at $1,000 and has 100 shares of stock
Orange and Lepp are two identical firms operating in identical markets. Orange is unlevered with assets valued at $1,000 and has 100 shares of stock outstanding. Lepp also has $1,000 in assets and has $100 in debt financed at an interest rate of 10% and has 50 shares of stock outstanding. The corporate tax rate is 30%. Which of the following comes closest to the level of EBIT that would make earnings per share the same for Orange and Lepp? A. An EBIT of $20 B. An EBIT of $40 C. An EBIT of $50 D. An EBIT of $60 E. An EBIT of $100
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