Galaxy Products Is Comparing Two Different Capital Structures, an All-Equity

question 48

Multiple Choice

Galaxy Products is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II) . Under Plan I, the company would have 112,000 shares of stock outstanding. Under Plan II, there would be 75,000 shares of stock outstanding and $600,000 in debt. The interest rate on the debt is 6.7 percent and there are no taxes. What is the break-even EBIT?

• A) $87,879
• B) $121,686
• C) $101,111
• D) $133,333
• E) $91,414

---

Definitions:

Disabled Students

Learners who have physical, mental, or developmental conditions that require specific accommodations to fully participate in educational activities.

Stuttering

A speech disorder characterized by repetitions, prolongations, or blockages that disrupt the normal flow of speech.

Myelination

The process by which axons are coated with myelin.

Axons

Long, threadlike structures on neurons that transmit electrical impulses away from the neuron's cell body to other neurons or muscles.