1. Northwestern Lumber Products currently has 25,000 shares of stock outstanding. Patricia, the financial manager, is considering issuing $180,000 of debt at an interest rate of 7.9 percent. Given this, how many shares of stock will be outstanding once the debt is issued if the break-even level of EBIT between these two capital structure options is $80,000? Ignore taxes.
22,269.27 shares
17,619.64 shares
19,185.83 shares
19,528.44 shares
20,556.25 shares
2. Gulf Shores Inn is comparing two separate capital structures. The first structure consists of 275,000 shares of stock and no debt. The second structure consists of 222,000 shares of stock and $1.58 million of debt. What is the price per share of equity?
$38.53
$34.07
$31.23
$36.69
$29.81