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linda_us, Master's Degree
Category: Business and Finance Homework
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Plan A is an all common equity structure in which $2.2 million

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Plan A is an all common equity structure in which $2.2 million dollars would be raised by selling 82.000 shares of common stock
Plan B would involve issuing $1.5 million dollars in long-term bonds with an effective interst rate of 12.5% plus $0.7 million would be rasied by selling 41,000 shares of common stock. The debt funds rasied under plan B have no fixed maturity date, in taht this amount of financial leverage is considered a permanent part of the firm's capital structure. Abe and his partners paln to use a 34% tax rate in their anlaysis, and they have hired you to
A. find the EBIT indifference level associaed witht he two financing plans.
B. prepare a pro forma statement for the EBIT level solved for in part A that shows the EPS will be the same regardless whether A or B is chosen
Thanks for requesting me. I am working on it.
Customer: replied 4 years ago.


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