What is minimum level for EBIT that Company X find

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Problem - Company X has decided to change the company's capital structure. The decision that they reach is to increase the leverage of their balance sheet, taking long-term debt from $ 80 million to $ 125 million. The current coupon on their outstanding debt is 7% and they expect that in order to issue that much new debt, they will have to offer the investors 7% as well. Company X is publicly held and currently has 10 million shares outstanding. Those shares trade on NASDAQ and traded at $ 45/share at the close tonight (April 7). Management's goal with all of this is to increase Return on Equity (ROE). What is the minimum level for EBIT that Company X's management will find acceptable.

Reference no: EM132928312

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