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Rise Against Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 150,000 shares of stock outstanding. Under Plan II, there would be 100,000 shares of stock outstanding and $1.20 million in debt outstanding. The interest rate on the debt is 5 percent, and there are no taxes.

Required:

Question: What is the break-even EBIT?

Note: Show all workings.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171335

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