Question: Commonwealth Construction ( CC ) needs $ 3 M of assets to get started. It expects to have BEP of 3 5 % . It

Commonwealth Construction (CC) needs $3M of assets to get started. It expects to have BEP of 35%. It will own no securities; all income will be operating income. If it chooses, CC can finance up to 30% of its assets with debt at an 8% interest rate. If it uses debt, the firm will finance with debt and common equity (no preferred). Assume 25% tax rate.

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