Question: Compute the indifference point between the two financing alternatives. If the expected level of EBIT for the firm is $240,000 with a standard deviation of

Compute the indifference point between the two financing alternatives. If the

  1. Compute the indifference point between the two financing alternatives.
  2. If the expected level of EBIT for the firm is $240,000 with a standard deviation of $50,000, what is the probability that the debt financing alternatives will produce higher earnings than the equity alternative? (EBIT is normally distributed.)
  3. If the debt alternative is chosen, what is the probability that the company will have negative earnings per share in any period?

expected level of EBIT for the firm is $240,000 with a standard

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