Essay
Landry 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 Landry is thinking of leveraging the firm by selling $600,000 of debt financing and retiring 100,000 shares,leaving 100,000 outstanding.The cost of debt is 10% annually,and the current corporate tax rate for Landry is 30%.If the CEO believes that Landry's EBIT will be $120,000,should the CEO leverage the firm? Explain.
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