Ebit finance | Business & Finance homework help

EBIT-EPS analysis ABe Forester and three of his friends from college have interested a group of venture capitalists in backing their business idea.  The propsed operation would consist of a series of retail outlets to distrubute and service a full line of vacuum cleaners and accessories.  These stores would be located in dallas, houston, and san antonio.  to finance the new ventrue tow plans have been proposed.   

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Plan A is an all common equity stuructr in which 2.3 million dollars would be raised by selling 84,000 share of common stock.

 

Plan B would involve issuing a 1.3 million dollars in long term bonds with an effective interest rate of 11.5% plus 1.0 million would be raised by selling 43,000 shares of common stock.

The debt funds raised under plan b have no fixed maturity date, in that this amount of financila leverage is considered a permanent part of the firsm captial strucutre.  Abe and his partners plan to use a 34% tax rate in their analysis and they have hired you on a consluting baisis to do the following.

A find the 

EBIT indifference level assoicate with the two financial plans.

B. prepare a pro forma income statement for the EBIT level solved for Part a. that show the EPS will be the same regardless whether plan a or plan b is chosen.

A find the EBIT indifference level assoicated with the two financing plans.

The EBIT indifference level associated with the two financing plans is $___ round to the nearest dollar