Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $10 million. The interest rate on this new debt issue will be 8%, and the number of shares after the...

Allegra Inc. has one million shares outstanding. The<br>company is considering the issue of debt of $10<br>million. The interest rate on this new debt issue will<br>be 8%, and the number of shares after the debt<br>issue will be reduced to 500,000. Given a corporate<br>tax rate of 35%, what is the EBIT that will cause the<br>firm's earnings per share to be indifferent between<br>issuing and not issuing debt?<br>

Extracted text: Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $10 million. The interest rate on this new debt issue will be 8%, and the number of shares after the debt issue will be reduced to 500,000. Given a corporate tax rate of 35%, what is the EBIT that will cause the firm's earnings per share to be indifferent between issuing and not issuing debt?

Jun 09, 2022

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Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $10 million. The interest rate on this new debt issue will be 8%, and the number of shares after the...

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