Determine the breakeven ebit

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Reference no: EM132035308

An unlevered firm with a market value of $1 million has 50,000 shares outstanding.

The firm restructures itself by issuing 200 new par bonds with face value $1,000 and 8% coupon. The firm uses the proceeds to repurchase outstanding stock.

In considering the newly levered versus formerly unlevered firm, what is the breakeven EBIT? Ignore taxes.

Reference no: EM132035308

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