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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 $1,000,000 in

The financial manager for a new startup company is faced with a problem of how to finance this new firm. The firm needs $1,000,000 in funds to become operational. The question is whether $1,000,000 of new equity at $10 a share should be issued or a 60/40 debt/equity capital structure with 8% coupon on debt is better. Required: What is the Breakeven EBIT? Should the firm use only equity or a 60/40 mix of debtequity in its capital structure?

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