Can you please explain how to solve the formula in detail? I need help in understanding solving the formula, the cross multiplication and all.

Indifference EBIT

The MPD Corporation has decided in favour of a capital restructuring. Currently, MPD uses no debt financing. Following the restructuring, however, debt would be $1 million. The interest rate on the debt would be 9%. MPD currently has 200,000 shares outstanding, and the price per share is $20. If the restructuring is expected to increase EPS, what is the minimum level for EBIT that MPDs management must be expecting? Ignore taxes in answering.4 To answer, we calculate EBIT at the indifferent point. At any EBIT above this, the increased financial leverage increases EPS, so this tells us the minimum level for EBIT. Under the old capital structure, EPS is simply EBIT/200,000. Under the new capital structure, the interest expense is $1 million .09 = $90,000. Furthermore, with the $1 million proceeds, MPD could repurchase $1 million/$20 = 50,000 shares of stock, leaving 150,000 outstanding. EPS is thus (EBIT $90,000)/150,000. Now that we know how to calculate EPS under both scenarios, we set them equal to each other and solve for the indifference point EBIT:

EBIT/200,000 = (EBIT $90,000) / 150,000

EBIT = (4 / 3) ( EBIT $90,000 )

EBIT = $360,000

Check that, in either case, EPS is $1.80 when EBIT is $360,000. Management at MPD is apparently of the opinion that EPS will exceed $1.80.