Calculate the EBIT-EPS indifference point

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Question - Sulzar's capital structure consists only of common stock (20 million shares), but the firm is planning a major expansion, which will require $100 million of new capital. Sulzar has a choice of obtaining the needed capital through the sale of 5 million shares of common stock at $20 per share or the sale of $100 million of first mortgage bonds that would have a coupon rate of 9%. Assuming Sulzar has a marginal tax rate of 40%, calculate the EBIT-EPS indifference point.

Reference no: EM132973308

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