QUESTION 4: Young Enterprises is currently 100% equity financed with 3 million shares of common stock issued and outstanding. A capital of $4 million is needed for this year's capital budget. Additional funds can be raised via: 1. Issuance of new common stocks at $20 per share OR Issuance of a 10-year bond carrying an annual coupon rate of 13%. 2. Young's tax rate is 40%. a) Calculate the indifference level of EBIT associated with the two financing plan? (10 marks) b) Which financing plan would you expect to cause the greatest change in EPS relative to a change in EBIT? Why? (3 marks) c) If EBIT is expected to be $7.8 million, which plan will result in a higher EPS? (2 marks) [Total: 15 marks]