Essay
Pierce Corp.is looking at two possible capital structures.Currently,the firm is an all-equity firm with $1.2 million dollars in assets and 200,000 shares outstanding.The market value of each stock is $6.00.The CEO of Pierce is thinking of leveraging the firm by selling $600,000 of debt financing.The cost of debt is 8% annually,and the current corporate tax rate for Pierce is 30%.What is the break-even EBIT for Pierce with these two possible capital structures?
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