Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas,<\/span> Houston, and San Antonio. To finance the new venture two plans have been proposed:<\/span><\/p>\n

Plan A is an all-common-equity<\/span> structure in which $2.2 million dollars would be raised by selling 86,000 shares of common stock.<\/span>
\n
Plan B would involve issuing $1.2 million in long-term bonds with an effective interest rate of 12.1 percent plus another $1.0 million would be raised by selling 43,000 shares of common stock. The debt funds raised under Plan B have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firm’s capital structure.<\/p>\n

<\/p>\n

Abe and his partners plan to use a 35 percent tax rate in their analysis, and they have hired you on a consulting basis to do the following:<\/p>\n

A: Find the EBIT indifference level associated with the two financing plans? (Round to the nearest dollar)<\/p>\n

<\/span> <\/p>\n","protected":false},"excerpt":{"rendered":"

Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be located in Dallas, Houston, and San Antonio. […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_joinchat":[]},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/144791"}],"collection":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/comments?post=144791"}],"version-history":[{"count":0,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/144791\/revisions"}],"wp:attachment":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/media?parent=144791"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/categories?post=144791"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/tags?post=144791"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}