$$Break$-$even EBIT$($with and without $$taxes$).$

Alpha Company is looking at two different capital$$ structures, one an$$ all$-$equity firm and the other a levered firm with $$$$0\mathrm{.}84$ million of debt financing at $8\%$ interest. The$$ all$-$equity firm will have a value of $$4\mathrm{.}2$ million and $420,000$ shares outstanding. The levered firm will have $336,000$ shares outstanding.

a$.$Find the$$ break$-$even EBIT for Alpha Company using EPS if there are no corporate taxes.

b$.$Find the$$ break$-$even EBIT for Alpha Company using EPS if the corporate tax rate is $25\%$

c$.$What do you notice about these two$$ break$-$even EBITs for Alpha$$ Company?

The addition of a tax rate $($CHANGES or DOES NOT CHANGE$)$ the$$ break$-$even point on the company EBIT as the tax rate impacts both the$$ all$-$equity firm and the levered firm.