JY Electronics has EBIT of $35 million, interest expense of $4.5 million, a tax rate of 24% and 15 million common shares outstanding. It is looking for $22 million in long-term capital to finance a project that will provide an increase to EBIT of $3.5 million each year. It could fund the project by issuing bonds with a coupon rate of 9.1% or issuing 2.2 million shares at $10 each. Ignoring issuing expense, at what level of EBIT is JY Electronics indifferent as to the financing option?

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The Answer of JY Electronics has EBIT of $35 million, interest expense of $4.5 million, a tax rate of 24% and 15 million common shares outstanding. It is looking for $22 million in long-term capital to finance a project that will provide an increase to EBIT of $3.5 million each year. It could fund the project by issuing bonds with a coupon rate of 9.1% or issuing 2.2 million shares at $10 each. Ignoring issuing expense, at what level of EBIT is JY Electronics indifferent as to the financing option?

JY Electronics Has EBIT of $35 Million, Interest Expense of $4.5