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View Full Version : An unlevered firm with a market value of $1 million has 50,000 shares outstanding.


daniela.petrova
Feb 24, 2012, 10:02 PM
An unlevered firm with a market value of $1 million has 50,000 shares outstanding. The firm restructures itself by issuing 100 new bonds with face value $1,000 and an 8% coupon. The bonds are issued at par. The firm uses the proceeds to repurchase outstanding stock. In considering the newly levered versus formerly unlevered firm, what is the break-even EBIT? Ignore taxes.