The newly levered versus formerly unlevered firm

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Reference no: EM132045068

An unlevered firm with a market value of $100,000 has 20,000 shares outstanding. The firm restructures itself by issuing 50 new par bonds with face value $1,000 and an 10% 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: EM132045068

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