Question: Practice Problem: Financial Leverage Example Allison Radios manufactures a complete line of radio and communication law enforcement agencies. The company, worth $80,000,000, is financed entirely

Practice Problem: Financial Leverage Example Allison Radios manufactures a complete line of radio and communication law enforcement agencies. The company, worth $80,000,000, is financed entirely by common stock: 2,000,000 shares at $40 per share. The company is conside substituting debt for equity, buying back a quarter of the shares and issuing $20 of 8 percent debt. Tax rate is 40 %. ring ,000,000 1. What is the indifference point in EBIT for the company (show your work)? 2. What is the ROE and EPS at this point (show your work)? 3. If the beta for the company is currently 0.80, what will be the beta of the new levered firm (show your work)

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