Sulzar's Capital Structure Consists Only of Common Stock (20 Million

question 4

Multiple Choice

Sulzar's capital structure consists only of common stock (20 million shares) , but the firm is planning a major expansion, which will require $100 million of new capital. Sulzar has a choice of obtaining the needed capital through the sale of 5 million shares of common stock at $20 per share or the sale of $100 million of first mortgage bonds that would have a coupon rate of 9%. Assuming Sulzar has a marginal tax rate of 40%, calculate the EBIT-EPS indifference point.

• A) $45 million
• B) $36 million
• C) $5 million
• D) $9 million

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Definitions:

Weber Test

A quick screening test for hearing that involves placing a tuning fork in the middle of the forehead to assess bone conduction of sound.

Vibrating Tuning Fork

A tool that produces a fixed pitch when struck, used in various applications like music for tuning instruments and in medicine for assessing hearing and vibratory sensations.

Hearing Loss

The partial or total inability to hear sounds in one or both ears.

Jaeger System

A chart used for testing visual acuity, especially for reading and near vision.