Determine the EPS Indifference EBIT Level for Poutine Company for the Following

question 57

Multiple Choice

Determine the EPS indifference EBIT level for Poutine Company for the following two scenarios: A debt/equity ratio of .6,pre-tax cost of debt is 8 percent,annual interest payments are $2,000,and the company has 1,000 shares outstanding.In scenario 2,the firm is all equity financed and has 1,500 shares outstanding.The tax rate is 40 percent for both scenarios.
The EPS indifference EBIT level for Poutine Company is:

• A) $10,000
• B) $6,000
• C) $4,000
• D) $2,000

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Definitions:

Net Exports

The value of a country's total exports minus the value of its total imports, indicating whether a country has a trade surplus or deficit.

Government Purchases

Expenditures made by the government for goods and services that directly satisfy human wants or needs or are used in the production of other goods.

GDP Deflator

A measure used to adjust the gross domestic product (GDP) for inflation by dividing the nominal GDP by the real GDP and then multiplying by 100.

Real GDP

The assessment of economic production's worth, corrected for variations in prices due to inflation or deflation, revealing the actual volume of goods and services generated.