(c) Maynard Company has no debt and a total market value of $250,000. EBIT is...
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(c) Maynard Company has no debt and a total market value of $250,000. EBIT is projected to be $28,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 50% lower. Maynard is considering a $90,000 debt issue with a 7% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding. Ignore taxes for this problem. (8 marks) (c) Maynard Company has no debt and a total market value of $250,000. EBIT is projected to be $28,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 50% lower. Maynard is considering a $90,000 debt issue with a 7% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding. Ignore taxes for this problem. (8 marks)
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