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The financial manager for a new startup company is faced with a problem of how to finance this new firm. The firm needs $5,000,000 in

The financial manager for a new startup company is faced with a problem of how to finance this new firm. The firm needs $5,000,000 in funds to become operational. The question is whether $5,000,000 of new equity at $20 a share should be sold or a 50/50 debt/equity capital structure with 10% coupon rate debt is better.

What is the Breakeven EBIT? Should the firm use only equity or a 50/50 mix of debt-equity in its capital structure?

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