GreenThumb Greenhouses Inc., currently an un-levered firm, is planning a major expansion program.GreenThumb hasproposed the following options to raise funds for the expansion.Plan A is an all equity plan.Under this plan, 2,000,000 common shares will be sold to net the company $2.50 per share.Plan B calls for a debt issue of 20-year maturity bonds as well as someadditional new equityat the same price per share as in plan A.The debt issue will be for $2,000,000 and carry a 9 percent interest rate.GreenThumb'stax rate is 40% and the company currently has 5,000,000 shares of common stock outstanding.

a)How much capital must be raised for this project?

b)Calculate the indifference EBIT (EBIT*) associated with these two plans.

c)Calculate the EPS at the indifference EBIT calculated in part b.

d)If the expected EBIT is $800,000, which plan should be chosen? Explain why?

e)The company has decided to change Plan A from issuing 2,000,000 common shares to issuing all new preferred shareswith a dividend of 3%.Plan B will remain the same.What will be the new indifference EBIT (EBIT*)?