Room and Board Has Determined That $41,650 Is the Break-Even

question 54

Multiple Choice

Room and Board has determined that $41,650 is the break-even level of earnings before interest and taxes for the two capital structures it is considering.The one structure consists of all equity with 15,500 shares of stock.The second structure consists of 12,500 shares of stock and $65,000 of debt.What is the interest rate on the debt?

• A)7.72 percent
• B)8.19 percent
• C)9.38 percent
• D)11.55 percent
• E)12.40 percent

---

Definitions:

Process

A series of actions or steps taken in order to achieve a particular end.

Innate

describes traits, behaviors, or abilities that are present from birth and not acquired through learning or experience.

Imprinting

A rapid form of learning occurring at a particular life stage wherein a young animal forms attachments to or preferences for specific objects or individuals.

Sensitive Period

A sensitive period is a specific time in an individual's development when they are more responsive to certain experiences or learning opportunities.