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Kelso Electric is an all-equity firm with 58,250 shares of stock outstanding. The company is considering...

Kelso Electric is an all-equity firm with 58,250 shares of stock outstanding. The company is considering the issue of $395,000 in debt at an interest rate of 9 percent and using the proceeds to repurchase stock. Under the new capital structure, there would be 36,500 shares of stock outstanding. Ignore taxes. What is the break-even EBIT between the two plans?

Multiple Choice

  • $81,607

  • $103,143

  • $67,116

  • $95,209

  • $59,659

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