Question: Plan A is an all common equity structure in which 2.4 million dollars would be raised by selling 90,000 shares of common stock. Plan B
Plan A is an all common equity structure in which 2.4 million dollars would be raised by selling 90,000 shares of common stock. Plan B would involve issuing $1.1 millon dollarsin long term bonds with an effective interest rate of 11.8% plus 1.3 million would be raised by selling $45,000 shares of common stock. The debt funds raised Under Plan B have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firms capital structure. Abe and his partners plan to use a 38% tax rate in their analysis. The EBIT indifference level associated with the two financing plans is $___________
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