Calculate and explain the break-even EBIT

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Reference no: EM132045148

Expo Corporation is a $50 million company with $30 million in equity and $20 million in debt. The equity consists of 300,000 shares of common stock priced at $100 per share. The debt has a coupon interest rate of 5%. Their corporate tax rate is 21%. Expo has approved a huge $20 million capital investment project. This can be financed by issuing 200,000 new shares of common stock at the $100 stock price, or by borrowing the $20 million with a 7% coupon bond issue.

Calculate and explain the break-even EBIT.

Reference no: EM132045148

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