Garson Corp

question 69

Essay

Garson 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 share of stock is $6.00.The CEO of Garson 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 Garson is 30%.If the CEO believes that Garson will earn $100,000 per year before interest and taxes,should she leverage the firm? Explain.

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Definitions:

Light Sensitivity

An increased susceptibility or responsiveness to light, which can cause discomfort or the need to squint or close the eyes in bright conditions.

Color Deficient

A condition characterized by difficulty in distinguishing between different colors, commonly referred to as color blindness.

Red-Sensitive

Related to the capacity to perceive or be affected by the red spectrum of light, often used in the context of visual perception.

Green-Sensitive

Referring to cells or mechanisms in the visual system that are particularly responsive to green wavelengths of light.