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"Burtronics Inc. is in the process of determining its optimal level of debt. Burtronics is a zero growth firm with all of its net income paid in...
"Burtronics Inc. is in the process of determining its optimal level of debt. Burtronics is a zero growth firm with all of its net income paid in dividend. Complete the following table, and recommend the optimal debt level for Burtronics. Make sure to show all your work, restrict your answers to the alternatives given, and justify your answer.Debt level* $200,000 $500,000Cost of debt 10% 13%Cost of equity 16% 18%EBIT $150,000 $150,000Interest Expenses $20,000 $ EBT $130,000 $Taxes (40%) $52,000 $EAT $78,000 $Value of equity $487,500 Value of debt $ $500,000Value of the Burtronics Stock price Shares outstanding 10,000 • • * The difference of $300,000 in debt will be used to repurchase shares
