Pierce Corp

question 25

Essay

Pierce 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 Pierce is thinking of leveraging the firm by selling $600,000 of debt financing.The cost of debt is 8% annually,and the current corporate tax rate for Pierce is 30%.What is the break-even EBIT for Pierce with these two possible capital structures?

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Definitions:

EGO

In kinship terminology, the central person from whom the degree of each relationship is traced.

Same Relatives

Family members who are related to an individual by blood or marriage, emphasizing the repetition or commonality of familial connections.

Kindred

An individual's close blood relatives on the maternal and paternal sides of his or her family.

Mode Of Subsistence

Refers to the means by which a society obtains its food and necessities, such as through hunting and gathering, agriculture, or trade.