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    Capital structure equations

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    Use the following information to answer the question . Assume a tax rate of 40%.

    Current Capital Structure Proposed Capital Structure
    Assets: $15 million $15 million
    Debt: $0 $ 6 million
    Equity: $15 million $ 9 million

    Common Share Price: $25.00 $ 22.50
    Shares Outstanding: 600,000 ???
    Coupon Rate: --- 4%
    Preferred Dividend Yield: --- 10%

    At what level of EBIT are the EPS of the two Capital Structures equal?

    a) $2,220,000
    b) $1,800,000
    c) $1,500,000
    d) $720,000
    e) More information is needed

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    https://brainmass.com/business/capital-structure-and-firm-value/capital-structure-equations-32700

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    1. At what level of EBIT are the EPS of the two Capital Structures equal?
    a) $2,220,000
    b) $1,800,000
    c) $1,500,000
    d) $720,000
    e) More information is needed

    This is a question ...

    Solution Summary

    Capital structure equations are solved.

    $2.19

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