Question: A firm currently has $ 4 , 0 0 0 , 0 0 0 in debt and $ 2 , 0 0 0 , 0

A firm currently has $4,000,000 in debt and $2,000,000 in equity. They are considering to restructure by issuing $1 million in equity to reduce their debt. The firm currently has 125,000 shares outstanding and the cost of debt is 7%. Tax rate =0%.
Calculate the break-even EBIT.

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