Question: Hi-Grade Regulator Company (see Problem 5) expects the EBIT level after the expansion program to be $1 million, with a two-thirds probability that it will

Hi-Grade Regulator Company (see Problem 5) expects the EBIT level after the expansion program to be $1 million, with a two-thirds probability that it will be between $600,000 and $1,400,000.
a. Which financing alternative do you prefer? Why?
b. Suppose that the expected EBIT level were $1.5 million and that there is a two-thirds probability that it would be between $1.3 million and $1.7 million. Which financing alternative would you prefer? Why?

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a The level of expected EBIT is only moderately above the indifference point of 840000 Moreover the ... View full answer

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