Homework answers / question archive / An unlevered firm with a market value of $1 million has 50,000 shares outstanding

An unlevered firm with a market value of $1 million has 50,000 shares outstanding

Economics

Share With

An unlevered firm with a market value of $1 million has 50,000 shares outstanding. The firm restructures itself by issuing 200 new par bonds with face value of $1,000 and an 8% coupon. The firm uses the proceeds to repurchase outstanding stock. In considering the newly levered versus formerly unlevered firm, what is the breakeven EBIT? Ignore taxes.