A firm had a current market value of $3,637,500 and is comparing two different capital structures: an all-equity plan and a leveled plan. Under the all-equity structure, the company would have 1500,000 shares of stock outstanding.  If the debt is taken on to buy back shares, there would be 105,000 shares of stock outstanding and $1,091,250 in debt. The interest rate on the debt is 5% and there are no ta es. What is the EBIT? A) 181,175 B) 145,500 C) 154,594 D) 172, 781 E) 163,688

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A firm had a current market value of $3,637,500 and is comparing two different capital structures: an all-equity plan and a leveled plan. Under the all-equity structure, the company would have 1500,000 shares of stock outstanding.  If the debt is taken on to buy back shares, there would be 105,000 shares of stock outstanding and $1,091,250 in debt. The interest rate on the debt is 5% and there are no ta es. What is the EBIT?

A) 181,175

B) 145,500

C) 154,594

D) 172, 781

E) 163,688

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