A company's capital structure is made up of 200,000 common shares and $1,000,000 debt at 12 percent interest.The company's tax rate is 50 percent.An additional $500,000 has to be raised,and the following financing alternatives are available:
Common shares: The company can sell additional shares at $10 a share.Hence,50,000 new shares would have to be issued.
Debt: Debt can be issued at 12 percent,requiring interest payments of $60,000.
Compute EPS as a function of EBIT for both alternatives and derive the break-even point.

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The Answer of A company's capital structure is made up of 200,000 common shares and $1,000,000 debt at 12 percent interest.The company's tax rate is 50 percent.An additional $500,000 has to be raised,and the following financing alternatives are available:
Common shares: The company can sell additional shares at $10 a share.Hence,50,000 new shares would have to be issued.
Debt: Debt can be issued at 12 percent,requiring interest payments of $60,000.
Compute EPS as a function of EBIT for both alternatives and derive the break-even point.

A Company's Capital Structure Is Made Up of 200,000 Common