Question: A firm is considering two different capital structures. The first option is an all-equity firm with 40,000 shares of stock. The levered option is 27,400

A firm is considering two different capital structures. The first option is an all-equity firm with 40,000 shares of stock. The levered option is 27,400 shares of stock plus some debt. Ignoring taxes, the break-even EBIT between these two options is $54,400. How much money is the firm considering borrowing if the interest rate is 7.5 percent?

Multiple Choice

$261,120
$228,480
$239,360
$204,997
$217,056

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