Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the...

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Tom Scott is the owner, president, and primary salesperson forScott Manufacturing. Because of this, the company's profits aredriven by the amount of work Tom does. If he works 40 hours eachweek, the company's EBIT will be $620,000 per year; if he works a50-hour week, the company's EBIT will be $765,000 per year. Thecompany is currently worth $3.9 million. The company needs a cashinfusion of $2 million, and it can issue equity or issue debt withan interest rate of 8 percent. Assume there are no corporatetaxes.

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Tom Scott is the owner, president, and primary salesperson forScott Manufacturing. Because of this, the company's profits aredriven by the amount of work Tom does. If he works 40 hours eachweek, the company's EBIT will be $620,000 per year; if he works a50-hour week, the company's EBIT will be $765,000 per year. Thecompany is currently worth $3.9 million. The company needs a cashinfusion of $2 million, and it can issue equity or issue debt withan interest rate of 8 percent. Assume there are no corporatetaxes.