Use the following to answer question 13:

	Current capital structure	Proposed capital structure
Assets	$15,000,000	$15,000,000
Debt	$0	$6,000,000
Equity	$15,000,000	$9,000,000
Share price	$25	$22.5
Shares outstanding	600,000	400,000
Bond coupon rate		8%

There are no taxes. EBIT is expected to be $2.5 million. All values are market values.

13- What is the break-even EBIT for these two capital structures?

A) $720,000

B) $1,250,000

C) $1,440,000

D) $2,000,000

E) $2,500,000

11- Which one of the following statements concerning financial leverage is/are correct?

A) Leverage is beneficial only when EBIT is relatively low.

B) M&M Proposition I states that financial leverage is irrelevant to the value of a firm.

C) Financial leverage lowers the risk level of a firm.

D) All of the above.

E) None of the above.

24- A firm has a WACC of 15%. It is financed with 50% debt and 50% equity. The firm's cost of debt is 10% and its tax rate is 40%. If the firm's dividend growth rate is 8% and its current stock price is $52, what is the value of the next dividend the firm is expected to pay?

A) $4.70

B) $6.84

C) $7.35

D) $8.32

E) None of the above.