a) The EBIT indifference level associated with the two financing plans is $ ____ (round to the nearest dollar)

b) Using EBIT of $330,000 complete the segment of the income statement for Plan A below: (Round income statement amounts to the nearest dollar except for the EPS to the nearest cent.)

Using EBIT of $330,000 complete the segment of the income statement for Plan B below: (Round income statement amounts to the nearest dollar except for the EPS to the nearest cent.)

Plan __ (A or B) will generate the higher EPS

(EBIT-EPS analysis) Three recent graduates of the computer science program at the University of Tennessee are forming a company that will write and distribute new application software for the iPhone. Initially, the corporation will operate in the southem region of Tennessee, Georgia, North Carolina, and South Carolina. A small group of private investors in the Atlanta, Georgia area is interested in financing the startup company and two financing plans have been put forth for consideration: .The first (Plan A) is an all-common-equity capital structure. $2.5 million dollars would be raised by selling common stock at $20 per common share. Plan B would involve the use of financial leverage. $1.4 million dollars would be raised by selling bonds with an effective interest rate of 10.7 percent (per annum), and the remaining $1.1 million would be raised by selling common stock at the $20 price per share. The use of financial leverage is considered to be a permanent part of the firm's capitalization, so no fixed maturity date is needed for the analysis. A 35 percent tax rate is deemed appropriate for the analysis. a. Find the EBIT indifference level associated with the two financing plans. b. A detailed financial analysis of the firm's prospects suggests that the long-term EBIT will be above $330,000 annually Taking this into consideration, which plan will generate the higher EPS? Stock Plan EBIT Less: Interest Expense Earnings Before Taxes Less: Taxes at 30% Net Income Number of Common Shares EPS Bond/Stock Plan EBIT Less: Interest Expense Earnings Before Taxes Less: Taxes at 30% Net Income Number of Common Shares EPS