, AA Tours is comparing two capital structures to determine how to best finance its eperations. The first option consists of all equity financing. The second option is based on a debt-equity ratio of 0.45. What should AA Tours do if its expected earnings before interest and taxes (EBIT) are less than the break-even level? Assume there are no taxes A. select the leverage option because the debt-equity ratio is less than 0.50 B. select the leverage option since the expected EBIT is less than the break-even level C select the unlevered option since the debt-equity ratio is less than 0.50 D. select the unlevered option since the expected EBIT is less than the break-even level E. cannot be determined from the information provided 31. The June Bug has a $270,000 bond issue outstanding. These bonds have a 7.5 percent coupon, pay interest semiannually, and have a current market price equal to 98.6 percent of face value. The tax rate is 39 percent. What is the amount of the annual interest tax shield? A. $3,948.75 B. $4,112.60 ?.ss.3 1 1.22 D. $7,897.50 E. $8,225.20 32. The Corner Bakery has a debt-equity ratio of 0.62. The firm's required return on assets is 14.2 percent and its cost of equity is 16.1 percent. What is the pre-tax cost of debt based on M & M Propesition II with no taxes? A. 7.10 percent B. 10.68 percent C. 11.14 percent D. 17.56 percent E. 18.40 percent 33, Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 10 percent. Bruce currently has no debt, and its cost of equity is 20 percent. The tax rate is 34 percen proceeds to repurchase shares? t, w hat will the value of Bruce & Co. be if the firm borrows S54,000 and uses the loan A. $280,130 B. $346,600 C. 5348,360 D. $378,900 E $381,520 10