Chick 'N Fish Is Considering Two Different Capital Structures

question 60

Multiple Choice

Chick 'N Fish is considering two different capital structures.The first option consists of 25,000 shares of stock.The second option consists of 15,000 shares of stock plus $150,000 of debt at an interest rate of 7.5 percent.Ignore taxes.What is the break-even level of earnings before interest and taxes (EBIT) between these two options?

• A)$2,813
• B)$3,134
• C)$16,410
• D)$28,125
• E)$31,338