Higgins Currently Has 2 Million Shares of Common Stock Outstanding

question 83

Multiple Choice

Higgins currently has 2 million shares of common stock outstanding that are selling for $32 per share.Higgins also has a $20 million mortgage bond outstanding that has an 11 percent coupon rate.Higgins is considering two alternatives to financing a major expansion.Plan A is to sell $10 million of additional long-term debt with a 12.5 percent coupon.Plan B is to sell 200,000 shares of common stock at $30 per share and $4 million in long-term debt with an 11.25 percent coupon.What is the EBIT indifference level between these two alternatives? Assume the marginal tax rate is 40 percent.

• A)$1,374,000
• B)$11,450,000
• C)$4,554,000
• D)$2,650,000

Comprehend the role and impact of technology in enhancing supply chain visibility and tracking.

Analyze the implications of supply chain design choices on logistics costs and customer service levels.

Recognize the trade-offs involved in selecting a particular distribution network design.

Understand the strategic importance of distribution network design in achieving competitive advantage.

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Definitions:

Capable

The quality of being able to achieve a specified task or outcome efficiently and effectively.

Consumer's Risk

The probability of accepting a defective product or service because the inspection or test fails to detect the flaw.

Hypothesis Testing

A statistical method that uses sample data to evaluate a hypothesis about the characteristics of a population.

Central Limit Theorem

A statistical theory stating that, given certain conditions, the distribution of the sum (or average) of a large number of independent, identically distributed variables will approach a normal distribution, regardless of the original variable's distribution.