Ernst Electrical Has 9,000 Shares of Stock Outstanding and No

question 91

Multiple Choice

Ernst Electrical has 9,000 shares of stock outstanding and no debt.The new CFO is considering issuing $80,000 of debt and using the proceeds to retire 1,500 shares of stock.The coupon rate on the debt is 7.5 percent.What is the break-even level of earnings before interest and taxes between these two capital structure options?

• A)$18,500
• B)$21,000
• C)$24,000
• D)$32,500
• E)$36,000

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Definitions:

Intrinsic Motivation

The drive to engage in activities for their inherent satisfaction rather than for some separable consequence.

Optimal Level of Arousal

A theory suggesting that individuals have a preferred level of stimulation or arousal that they seek to maintain by increasing or decreasing stimulation.

Classical Conditioning

An educational method that happens by linking an external stimulus with a stimulus that occurs naturally.

Self-Regulation

The ability to understand and manage your behavior and reactions to feelings and things happening around you.