Olde Towne Industries Is Considering Both an All Equity and a Debt-Equity

question 348

Multiple Choice

Olde Towne Industries is considering both an all equity and a debt-equity capital structure. The all equity capital structure would consist of 40,000 shares of stock. The debt and equity option would consist of 25,000 shares of stock plus $300,000 of debt at an interest rate of 8%. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.

• A) $52,000
• B) $57,000
• C) $64,000
• D) $66,000
• E) $74,000

---

Definitions:

Professional Performance

The level of competency and skill demonstrated by a professional in their field of work.

Systemic Theory

A theory that views any system (e.g., ecological, biological, social) as a complex set of elements that interact with each other and must be understood as a whole.

Communication

The act or process of using words, sounds, signs, or behaviors to express or exchange information or to express ideas, thoughts, feelings, etc., to someone else.

Community Sanction

A form of punishment imposed by a court for criminal activities that is served in a community rather than in jail or prison, including services like probation or community service.