alleryStart learning →Plan X has 100,000 shares; Plan Y has 60,000 shares and 80,000 interest. Indifference EBIT?
A240,000
B140,000
C200,000
D180,000
Answer & Solution
Correct answer: C. 200,000
Setting E/100,000 equal to (E - 80,000)/60,000 gives 40E = 8,000,000, so E = 200,000.
Keep practising Capital Structure Basics
Browse all Capital Structure Basics questions for CA Inter, or explore more Financial Management topics.
Related questions
Pecking order theory says firms first prefer to finance investments withMiller said that, if trade-off theory held, firms ought to carryFrank and Goyal found the pecking order fails mainly for which firms?In which year was Modigliani awarded the Nobel Prize in Economics?MM's operational justification of irrelevance relies onUnder MM without taxes, unlevered Firm U and levered Firm L havePerpetual after-tax income of 144 at an 8% rate gives a firm value of?A 1,000 investment returns 1,100 and income is taxed at 20%. After-tax return?