1. ADA, Inc. currently has 20,000 shares of stock outstanding at a market value of $40 a share. The firm is currently 100% financed with equity. ADA is considering a restructuring which will include issuing $400,000 of bonds at par value with a coupon rate of 6%. What is the break-even EBIT?
a) $12,000
b) $24,000
c) $36,000
d) $48,000
e) $60,000
2. Assume that S0 is the current price of the stock. There is no dividend payment. The payment at time 0 of the prepaid forward contract is S0. True or False?
3. Assume that S0 is the current price of the stock. There is no dividend payment. The payment at time 0 of the forward contract is S0. True or False?