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What is the break even level of ebit

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MicroLink is a non-profit organization. Currently the company has no debt and there are 4,000,000 common shares outstanding. The current share price is $2.50. The firms senior management is proposing a capital restructuring to borrow $3,000,000 and use the proceeds to repurchase equity. The cost of debt is 8%. Assume there are no corporate taxes.

-What is the break even level of EBIT between current and proposed capital structure?

-Assume the corporate tax rate is 35%. What is the break even level of EPS for the firm?

Reference no: EM132499431

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