Beta, Gamma, and Delta Companies are similar in every way except for their capital structures....
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Beta, Gamma, and Delta Companies are similar in every way except for their capital structures. Beta is an all-equity firm with $3,000,000 of value and 100,000 shares outstanding. Gamma is a levered firm with the same value as Beta, but $900,000 in debt at 55% and 70,000 shares outstanding. Delta is a levered firm with the same value as both Beta and Gamma with $1,800,000 in debt at 16% and 40,000 shares outstanding. What are the break-even EBITs for Beta and Gamma, Beta and Delta, and Gamma and Delta Companies if the corporate tax rate is 25% for all three companies?
What is the break-even EBIT for Beta and Gamma companies?
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