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EBIT and Leverage. Wellington Boots Ltd is an all equity-financed firm that ha
On march 1 2013 Peppers Deli Loaned $ 18000.00 to Simms Supply for one year at
September 15, 2020Share Valuation. Most companies pay half yearly dividends on their ordinary sh
September 15, 2020EBIT and Leverage.
Wellington Boots Ltd is an all equity-financed firm that has $5 400 000 of equity finance consisting of 3 000 000 ordinary shares outstanding. The current
share price is $1.80. Wellington Boots is considering changing its capital structure. It is evaluating the use of debt in its capital structure and
proposes to borrow $1 800 000 and use the proceeds to purchase some of its shares. The interest rate on debt is 7% p.a. and the company tax rate is 30%.
a. Should Wellington Boots change its capital structure if EBIT is expected to be $700 000?
b. Given the information above what is the break-even EBIT point?
