Faulkner's Fine Fries Inc. (FFF) is thinking about reducing its debt burden. Given the following capital structure information and an expected EBIT of $50 million (plus or minus 10 percent) next year, should FFF change their capital structure?
Current Proposed
Total assets $750 million $750 million
Debt 450 million 300 million
Equity 300 million 450 million
Common stock price $30 $30
Number of shares 10,000,000 15,000,000
Interest rate 12% 12%
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