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What is the break-even level of ebit

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Question - Suppose you are the only owner of a firm, James Smith Co, a sportsware retail company located in Toronto. Your firm is currently unlevered with 2,500 shares outstanding and assets valued at $50,000. Suppose that the company can exchange 600 shares of stock for $12,000 in debt paying 9% interest. From the standpoint of EPS, what is the break-even level of EBIT which both, unlevered and levered, EPS are equal? Assume corporate tax rate is 40%.

Reference no: EM133019141

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