A Winnipeg fiRm Is Considering Two Separate Capital Structures

question 258

Multiple Choice

A Winnipeg firm is considering two separate capital structures. The first is an all equity plan consisting of 25,000 shares of stock. The second plan would consist of 10,000 shares of stock and
$90,000 in debt at a cost of 8%. Ignore taxes. What is the break-even EBIT?

• A) $12,000
• B) $15,000
• C) $18,000
• D) $19,000
• E) $21,000

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Definitions:

Return On Total Assets

A financial ratio that measures a company's efficiency in using its assets to generate profit, calculated by dividing net income by total assets.