Question
Sunder is a publicly traded shipping company with 50 million shares outstanding. Its current share price is $15 per share. The company also has $500
Sunder is a publicly traded shipping company with 50 million shares outstanding. Its current share price is $15 per share. The company also has $500 million debt with 3% interest rate charged by the lender. The management is considering two financing alternatives to raise $120 million from capital markets for the development of a new shipping terminal in Rotterdam. Under Option A, they will sell new shares at the current stock price; under Option B, they will borrow at the 4%. The company's marginal tax rate is 35% and their WACC is 10%. At what EBIT will Sunder be indifferent between Option A and B?
PLEASE ANSWER ASAP!!!!!
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