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Question: Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $4.4 million of debt financing at 16% interest. The all-equity firm will have a value of $8.8million and 440,000 shares outstanding. The levered firm will have 220,000 shares outstanding.

a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes.

b. Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is 20%.

c. What do you notice about these two break-even EBITs for Alpha Company?

a. What is the break-even EBIT for Alpha Company using EPS if there are no corporate taxes? $ (Round to the nearest? dollar.)

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Category:- Basic Finance
Reference No.:- M92786398

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