/apid Motors Inc. is considering a change to its capital structure. Selected inancial information is provided in the table below. The current capital structure s shown in the column labeled 'Current: Vapid is trying to choose between two inancing alternatives. Under Option A, they will sell 140 new shares at the current price. Under Option B, they will borrow $133 at 6.767% and no new equity will be issued. There are currently 700 shares outstanding, and the firm is lebt-free. The tax rate is 40%. What is the EBIT-EPS indifference point? Selected Financial Information Vapid Motors Inc.
/apid Motors Inc. is considering a change to its capital structure. Selected inancial information is provided in the table below. The current capital structure s shown in the column labeled 'Current: Vapid is trying to choose between two inancing alternatives. Under Option A, they will sell 140 new shares at the current price. Under Option B, they will borrow $133 at 6.767% and no new equity will be issued. There are currently 700 shares outstanding, and the firm is lebt-free. The tax rate is 40%. What is the EBIT-EPS indifference point? Selected Financial Information Vapid Motors Inc.
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
Section: Chapter Questions
Problem 1PS
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Question 5
Vapid Motors Inc. is considering a change to its capital structure. Selected
financial information is provided in the table below. The current capital structure
is shown in the column labeled 'Current: Vapid is trying to choose between two
financing alternatives. Under Option A, they will sell 140 new shares at the
current price. Under Option B, they will borrow $133 at 6.767% and no new
equity will be issued. There are currently 700 shares outstanding, and the firm is
debt-free. The tax rate is 40%. What is the EBIT-EPS indifference point?
Selected Financial Information Vapid Motors Inc.
Debt
Interest
Tax Rate
Price
Current
$0
32
$0
40%
$0.95
Shares Outstanding 700
The EBIT-EPS indifference point is $
Option A
$0
$0
40%
n.a.
840
Option B
$133
$9
40%
n.a.
700
. (Round to the nearest dollar.)
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