Problem:
Chick ‘N Fish is considering two different capital structures. The first option consists of 25,000 shares of stock. The second option consists of 15,000 shares of stock plus $150,000 of debt at an interest rate of 7.5 percent. Ignore taxes.
Required:
Question: What is the break-even level of earnings before interest and taxes (EBIT) between these two options?
- $2,813
- $3,134
- $16,410
- $28,125
- $31,338
Note: Please provide through step by step calculations.