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Question: XYZ corporation has a capital structure consisting of 10% debt with a market value of 5,000,000 and 500,000 ORDINARY Shares with a market value of 40,000,000.

The company is palnning a 10,000,000 expansion program using any one of the following financing plans

Plan A- Issue Additional bonds at 12%

Plan B- Issue 9% preffered shares

Plan C Sell ordinarry ( common ) shares at 160 per share

Corporate Tax Rate 32%

Expected level of EBIT after the expansion is 4,500,000

Required: 1. Calculate the EPS under each of the plans

2. Compute the financial break-even point in the level of EBIT at the compnay EPS equals zero

3. Compute the Indifference Point

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M93075779

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