Question: Please provide solution and answer (A-E) Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $15 million. The

Please provide solution and answer (A-E)

Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $15 million. The interest rate on this new debt issue will be 8%, and the number of shares after the debt issue will be reduced to 500,000. Given a corporate tax rate of 40%, what is the EBIT that will cause the firm's earnings per share to be indifferent between issuing and not issuing debt?

a. $1,200,000

b. $1,800,000

c. $2,400,000

d. $3,000,000

e. $3,600,000

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