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Q. 101. An unlevered firm with a market value of $1 million has 50,000 shares outstanding. Firm restructures itself by issuing 200 new par bonds with face value $1,000 also an 8% coupon. Firm uses proceeds to repurchase outstanding stock. In considering newly levered versus formerly unlevered firm, illustrate what is break-even EBIT? Ignore taxes.

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Operation Management, Management Studies

Category:- Operation Management
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