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Northeast Lobster currently has 18,500 shares of stock outstanding. It is considering issuing $100,000 of debt at an interest rate of 6.3 percent. The break-even level of EBIT between these two capital structure options is $77,000. For this to be true, what is the current stock price

Respuesta :

current Stock price of a single share of Northeast Lobster is $3.82 and the current total value of shares is $70,670

Explanation:

Earnings before interest and Tax                  $77,000

(Less)

Interest on debt ( $100,000×6.3÷100)

[tex]Interest on debt ( $100,000×6.3÷100)[/tex]                        $6300

                                                                      ---------------------

           Earning After tax is                                $70,700

current Stock price of share is   $70,700÷18500 =  $3.82

[tex]current Stock price of share is $70,700÷18500 = $3.82[/tex]

Total current value of shares is = 18500 × $3.82 = $70,670

[tex]Total current value of shares is = 18500 × $3.82 = $70,670[/tex]

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