Welcome to Westonci.ca, the Q&A platform where your questions are met with detailed answers from experienced experts. Discover comprehensive answers to your questions from knowledgeable professionals on our user-friendly platform. Experience the convenience of finding accurate answers to your questions from knowledgeable 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 useful. Return anytime for more information and answers to any other questions you have. Thank you for choosing our platform. We're dedicated to providing the best answers for all your questions. Visit us again. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.