Landry Corp

question 78

Essay

Landry Corp.is looking at two possible capital structures.Currently,the firm is an all-equity firm with $1.2 million dollars in assets and 200,000 shares outstanding.The market value of each stock is $6.00.The CEO of Landry is thinking of leveraging the firm by selling $600,000 of debt financing and retiring 100,000 shares,leaving 100,000 outstanding.The cost of debt is 10% annually,and the current corporate tax rate for Landry is 30%.If the CEO believes that Landry's EBIT will be $120,000,should the CEO leverage the firm? Explain.

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Definitions:

Communication Skills

The ability to convey information effectively and efficiently, both verbally and non-verbally, to a range of audiences.

Competitive Skill

A rephrased definition: An attribute or capability that gives an individual or entity an edge over rivals in a competitive environment.

Process Skills

The abilities required to manage and execute processes in an organization efficiently, including planning, monitoring, and optimizing various operational or production processes.

Negotiating Skills

The abilities required to effectively discuss, persuade, and come to mutually beneficial agreements or solutions between parties.