Discover a world of knowledge at Westonci.ca, where experts and enthusiasts come together to answer your questions. Ask your questions and receive accurate answers from professionals with extensive experience in various fields on our platform. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.
Sagot :
Answer:
The amount the firm considering borrowing is $244,725.74.
Explanation:
At the break-even point, we have:
Break-even EBIT / Number of shares under all-equity = (Break-even EBIT - Interest) / Number shares under lever option ..................... (1)
Substituting all the relevant values into equation (1) and solve for interest, we have:
$56,000 / 42,000 = ($58,000 - Interest) / 29,000
$1.33333333333333 = ($58,000 - Interest) / 29,000
$1.33333333333333 * 29,000 = $58,000 - Interest
$38,666.67 = $58,000 - Interest
Interest = $58,000 - $38,666.67
Interest = $19,333.33
Therefore, we have:
Amount of debt = Interest / Interest rate = $19,333.33 / 7.9% = $244,725.74
Therefore, the amount the firm considering borrowing is $244,725.74.
We hope our answers were helpful. Return anytime for more information and answers to any other questions you may have. We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.
