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Calculate the break-even level of earnings

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Reference no: EM133000831

A new board of directors of the BMP Corporation is considering a capital restructuring as currently BMP uses no-debt financing. There are currently 2 M shares on issue.

The board is considering issuing $500,000 of debt and which will result in 1 M number of shares on issue after the proposed restructure. The interest rate on debt is 7.6% per annum.

Shares are currently trading at $3

Calculate the break-even level of earnings before interest and taxes (EBIT) between both capital structure options.

Use the current Australian company tax rate.

Reference no: EM133000831

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