A new board of directors of the BMP Corporation is considering a capital restructuring as currently BMP uses no-debt financing.The board is considering issuing $3 400 000 of debt and using the funds to retire one quarter of 160 000 shares that the company currently has outstanding.The interest rate on debt is 8.30% per annum.Calculate the break-even level of earnings before interest and taxes (EBIT) between both capital structure options:
A) $1 128 800
B) $3 240 000
C) $282 200
D) $375 326
E) $2 550 000
Correct Answer:
Verified
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