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What level of EBIT would the exchange be wise

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Reference no: EM133032782

Question - Suppose you are the only owner of a firm, your firm is currently unlevered with 2500 shares outstanding and assets valued $50000. Suppose that the company can exchange 500 shares of stock for $10000 in debt paying 10% interest. From the standpoint of EPS, under what level of EBIT, would the exchange be wise? Assume corporate tax is 40%.

Reference no: EM133032782

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