Santos Unlimited (SU) was

Santos Unlimited (SU) was

Santos Unlimited (SU) was originally unlevered withshares outstanding. However, after a major financial restructure, SU now has $of debt, with an annual interest expense ofpercent. The restructuring has reduced the number of shares to. A group of shareholders of SU are not convinced that this move towards adopting financial leverage is a good idea. Their main argument is that there is now some range of EBIT, however low, that will make the shareholders worse off than before. Help understand the situation better by computing the level of earnings before interest and tax (EBIT) that would make shareholders indifferent between being unlevered (i.e. not having any debt) and levered (i.e. having debt). Assume apercent corporate tax rate.

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