Question: Suppose the ABC Corporation is currently evaluating a capital restructuring that involves increasing its existing $80 million in debt to $125 million. The share price

Suppose the ABC Corporation is currently evaluating a capital restructuring that involves increasing

its existing $80 million in debt to $125 million. The share price of ABC Corporation is $45. The firm

currently has 10 million shares outstanding and does not need to pay taxes. ABC Corporation is

planning to take debt from XYZ bank and use this amount for repurchasing shares. The interest of

this loan will be 10 percent. What is the break-even EBIT? Show detailed calculation process.

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