Blesbok Bakery is trying to determine whether it should finance a production facility costing R15,000,000 with new ordinary shares or bonds. Blesbok has the following financing alternatives (a) issue new ordinary shares at R30 per share or, (b) issue new bonds with a coupon rate of 12. The firm has a marginal tax rate of 28 and currently has 2,000,000 ordinary shares outstanding and R25,000,000 of 10 debt outstanding Its cost of equity is 17. What is the indifference level of earnings before interest and taxes (EBIT) between these two financing alternatives?

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ANS WER The indifference level of earnings before interest and taxes E BIT between the two finan... View the full answer