The Long Lodging Co. is financed entirely with 5 million ordinary shares selling for $25 a share. Capital of $7 million is needed for this year's capital budget. Additional funds can be raised with new shares (ignore dilution) or with 12 percent 10-year bonds. Long Lodging's tax rate is 30 percent.
Calculate the financing plan's EBIT indifference point.
At the indifference point,the Earnings per share under both debt and equity financing option shall be same If $7 million is... View the full answer