Caligula Corp. has 870,000 shares outstanding, currently trading at $48. The company is borrowing $3,200,000 to buy back some shares. The interest rate is 9%. Assume that the buy-back does not affect the stock price. What is the break-even EBIT if there are no taxes? What is the break-even EBIT if the tax rate is 34%?

Caligula Corp. has 870,000 shares outstanding, currently trading at $48. The company is borrowing $3,200,000 to buy back some shares. The interest rate is 9%. Assume that the buy-back does not affect the stock price. What is the break-even EBIT if there are no taxes? What is the break-even EBIT if the tax rate is 34%?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...

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What is the break-even EBIT if there are no taxes?

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