What is the break-even level of ebit

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Question - Steve Lee Co., a men's clothing manufacturing company located in Toronto, is currently unlevered with 10,000 shares outstanding and assets valued at $500,000. Suppose that the company issues $250,000 debt with 12% interest to buy back some of the outstanding shares.

From the standpoint of EPS, what is the break-even level of EBIT which both, unlevered and levered, EPS are equal? Assume there is no corporate tax.

Reference no: EM133030489

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