Crown Data (CD) Has a Current Capital Structure That Consists

question 65

Multiple Choice

Crown Data (CD) has a current capital structure that consists of$120 million in common equity (15 million shares) and $80 million in long-term debt with an average interest rate of 11 percent.CD is considering an expansion project that will cost $22 million.The project will be financed either by issuing long-term debt at a cost of 12.5 percent, or the sale of new common stock at $35 per share.The firm's marginal tax rate is 40%.What is the EBIT indifference point between the two financing options?

• A)$71.5 million
• B)$77.2 million
• C)$68.3 million
• D)$1.0 million

---

Definitions:

Delegating Style

A management approach where authority and tasks are transferred to subordinates or team members.

Telling Style

A leadership approach focused on unilaterally giving instructions and expecting compliance.

Situational Leadership

A leadership approach that emphasizes the need to adjust style and strategies based on the maturity level of the team members and the specific circumstances facing the organization or project.

Delegating Style

A management approach that involves assigning responsibility and authority to subordinates while maintaining accountability.