Question
Shea Corporation is planning for a business expansion that requires additional financing of RM2 million. Two financing plans have been put forward for consideration. Plan
Shea Corporation is planning for a business expansion that requires additional financing of RM2 million. Two financing plans have been put forward for consideration.
Plan A RM2 million would be raised by issuing additional common stocks for RM20 per share
Plan B RM1 million would be raised through borrowing with an interest rate of 11% per annum, and the remaining RM1 million would be raised by issuing additional common stocks for RM20 per share.
Perform an EBIT-EPS analysis and find the EBIT indifference level associated with the two financing plans.
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