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Charra [1.4K]
3 years ago
10

Galaxy Products is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under P

lan I, Galaxy would have 245000 shares of stock outstanding. Under Plan II, there would be 237014 shares of stock outstanding and $310000 in debt outstanding. The interest rate on the debt is 9.9 percent and there are no taxes. What is the breakeven EBIT? g
Business
1 answer:
ivann1987 [24]3 years ago
4 0

Answer:

the breakeven EBIT for Galaxy Products is $767,250

Explanation:

Consider the following calculations and formulas of EBIT

EBIT/245,000 = [EBIT- 9.9%* 310,000]/237,014

0.96 EBIT = EBIT- 30690

0.04 EBIT = 30,690

Break Even EBIT = $767,250

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