Break-even EBIT? (with and without taxes).
Alpha Company is looking at two different capital? structures, one an? all-equity firm and the other a levered firm with ?$2.88 million of debt financing at 8% interest.
The? all-equity firm will have a value of ?$7.2 million and 360,000 shares outstanding. The levered firm will have 216,000 shares outstanding.
a. Find the? break-even EBIT for Alpha Company using EPS if there are no corporate taxes.
b. Find the? break-even EBIT for Alpha Company using EPS if the corporate tax rate is 35%.
c. What do you notice about these two? break-even EBITs for Alpha? Company?