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Author Question: Magnetic Attractions Inc. a web-based dating company, needs to raise capital to finance an expansion ... (Read 70 times)

JGIBBSON

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on: Apr 25, 2021
Magnetic Attractions Inc. a web-based dating company, needs to raise capital to finance an expansion in their business. The company is trying to decide between borrowing or issuing more equity. Selected financial information is provided in the table below. The current capital structure is shown in the column labeled "Current." Under Option E, they will sell 200 new shares at the current price. Under Option D, they will borrow $160 at 6.25% and no new equity will be issued. There are currently 400 shares outstanding, and the firm is debt-free. The tax rate is 40%. To help Magnetic Attractions with its decision, what is the EBIT-EPS indifference point?

Magnetic Attractions Inc.​​​
​CurrentOption E (Equity)Option D (Debt)
Debt0$0$160
Interest0$0$10
Tax Rate40%40%40%
Price$0.80N/AN/A
Shares Outstanding400600400

◦ $32
◦ $48
◦ $16
◦ $30
◦ $28
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by JGIBBSON on Apr 25, 2021

fauacakatahaias

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Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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JGIBBSON

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Reply 2 on: Apr 25, 2021
Excellent

tranoy

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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