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Southern Cornbread Company is an all equity rm headquartered in Birmingham, Alabama. Discussions have been held to look at a different capital structure which would
Southern Cornbread Company is an all equity rm headquartered in Birmingham, Alabama. Discussions have been held to look at a different capital structure which would include acquiring some debt (leverage) Under pressure from a new group of major stockholders, however, Walker is considering acquiring some debt (leverage) which might improve earnings per share. The company currently has 8000 shares of common stock outstanding, but he is thinking about borrowing $16,000 at 8% per year and buying back 2000 of those shares. The Southern Cornbread Company is currently exists in a world with no taxes. Refer to the scenario above. What is the EBIT that would make the choice between his options (all equity or include leverage) indifferent. (break even EBIT). O a. $3,400 0 b-$4,600 O c. $6,000 0 d-$5,120
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