If a firm has a $500,000 debt limit before AT k_dwill change if taxes are 30% and total debt is 50% of the capital structure, calculate the debt break point in the MCC schedule. A) $500,000 B) $300,000 C) $2,500,000 D) $1,000,000

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Quizplus · Accepted Answer

The debt break point is calculated by dividing the debt limit by the proportion of debt in the capital structure. Here, $500,000 / 0.50 = $1,000,000.

If a Firm Has a $500,000 Debt Limit Before AT Kd

If a Firm Has a $500,000 Debt Limit Before AT K_d