The company has been 100% equity firm with no debt. Shares of Finance Experts (FEX) sell for $100 per share and there are 1 million shares…

The company has been 100% equity firm with no debt. Shares of Finance Experts (FEX) sell for $100 per share and there are 1 million shares outstanding. The company generates an average of $10 million net operating income (EBIT) per year and is subject to 30% tax. Finance Experts board of directors ask Charles about changing the capital structure of the firm to 80% equity and 20% debt by issuing debt and using the funds to repurchase FEX shares. The firm can issue debt at 5% interest.