Ettalong Electrical Company Ltd Has 9000 Shares Outstanding and No

Multiple Choice

Ettalong Electrical Company Ltd has 9000 shares outstanding and no debt.The new CFO is considering issuing $80 000 of debt and using the proceeds to retire 1500 shares.The coupon rate on the debt is 7.5 per cent.What is the break-even level of earnings before interest and taxes between these two capital structure options if the tax rate is 30 per cent?

A) $32 500
B) $24 000
C) $36 000
D) $21 000
E) $18 500