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Suppose that Company X has decided in favor of a capital restructuring that involves increasing debt and repurchasing equity. The debt will increase from 5
Suppose that Company X has decided in favor of a capital restructuring that involves increasing debt and repurchasing equity. The debt will increase from 5 million to 25 million. The interest rate on the debt is 12% and it is not expected to change. The firm currently has 1 million shares outstanding, and the price per share is 40. If the restructuring is expected to maintain earnings per share (EPS), what is the level for earnings before interest and taxes (EBIT) that the management must be expecting? Ignore taxes and costs of financial distress
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