Traindriver Engineering Has Determined That $74,000 Is the Break-Even Level

question 94

Multiple Choice

Traindriver Engineering has determined that $74,000 is the break-even level of earnings before interest and taxes for the two capital structures it is considering.The one structure consists of all equity with 20,000 shares of stock.The second structure consists of 17,000 shares of stock and $110,000 of debt.What is the interest rate on the debt?

• A)5.41 percent
• B)5.88 percent
• C)7.07 percent
• D)9.24 percent
• E)10.09 percent

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