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Kelso Electric is an all-equity firm with 52,250 shares of stock outstanding. The company is considering...

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Finance

Kelso Electric is an all-equity firm with 52,250 shares of stockoutstanding. The company is considering the issue of $355,000 indebt at an interest rate of 9 percent and using the proceeds torepurchase stock. Under the new capital structure, there would be32,500 shares of stock outstanding. Ignore taxes. What is thebreak-even EBIT between the two plans?

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Kelso Electric is an all-equity firm with 52,250 shares of stockoutstanding. The company is considering the issue of $355,000 indebt at an interest rate of 9 percent and using the proceeds torepurchase stock. Under the new capital structure, there would be32,500 shares of stock outstanding. Ignore taxes. What is thebreak-even EBIT between the two plans?

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