What is AQ&Q’s indifference level of ebit

Question-

AQ&Q has EBIT of $2 million, total assets of $10 million, stockholders' equity of $4 million and pretax interest expense of 10 %.

1) What is AQ&Q's indifference level of EBIT?

2) Given its current situation, may it benefit from decreasing or increasing its use of debt? Exemplify.

3) Assume we are told AQ&Q's average tax rate is 40 % and how does this affect your answers to (a) and (b)?

Posted Date: 11/24/2013 11:55:15 PM | Location : United Kingdom(UK)

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