Demolition Construction Services Has 12,500 Shares of Stock Outstanding and No

Demolition Construction Services has 12,500 shares of stock outstanding and no debt.The new CFO is considering issuing $75,000 of debt and using the proceeds to retire 2,500 shares of stock.The coupon rate on the debt is 6.8 percent.What is the break-even level of earnings before interest and taxes between these two capital structure options?

A) $16,860
B) $18,520
C) $18,240
D) $21,000
E) $15,300

Correct Answer:

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